Throne Posted October 12, 2016 Report Share Posted October 12, 2016 In my economic textbook, it separates the Aggregate Supply curve into LRAS, which is a vertical line, and SRAS, which is a curve. However, I buy a guidebook of IB economics, inside, it says the AS is only one line, which is demonstrated as a curve, without the vertical line; also they did not separate into two components, long run and short run. So which one is the correct version of the Keynesian model? Reply Link to post Share on other sites More sharing options...
Genri Posted October 15, 2016 Report Share Posted October 15, 2016 the second diagram is the long run Keynesian model and the first diagram, the vertical line, is the long run monetarist model. for the SR, all the curves are basically diagonals, just like the normal supply curve Reply Link to post Share on other sites More sharing options...
Throne Posted October 19, 2016 Author Report Share Posted October 19, 2016 On 2016/10/16 at 1:28 AM, Genri said: the second diagram is the long run Keynesian model and the first diagram, the vertical line, is the long run monetarist model. for the SR, all the curves are basically diagonals, just like the normal supply curve But why they put a monetarist LRAS inside graph one, whereas label the curve, similar to Keynesian LRAS, as SRAS? Reply Link to post Share on other sites More sharing options...
Natasha Posted October 20, 2016 Report Share Posted October 20, 2016 12 hours ago, Throne said: But why they put a monetarist LRAS inside graph one, whereas label the curve, similar to Keynesian LRAS, as SRAS? The second diagram shows the ADAS model from the Keynesian perspective, which consists of the Keynesian AS curve which is perfectly inelastic at low levels of output, and moves to become perfectly inelastic beyond the full employment level of output, Yf. So, the second diagram is a correct representation of the Keynesian model. The first diagram shows the ADAS model from the New Classical perspective. It consists of a vertical LRAS curve at Yf, and the AD and SRAS curves. Although the SRAS curve in the diagram you provided is shaped like the Keynesian AS, you should not mistake them to be the same thing - you can very well illustrate the SRAS as a straight diagonal line instead (as in the diagram below). In fact, drawing the SRAS as a diagonal is what's in most IB economics text books. Reply Link to post Share on other sites More sharing options...
Throne Posted October 20, 2016 Author Report Share Posted October 20, 2016 37 minutes ago, Natasha said: The second diagram shows the ADAS model from the Keynesian perspective, which consists of the Keynesian AS curve which is perfectly inelastic at low levels of output, and moves to become perfectly inelastic beyond the full employment level of output, Yf. So, the second diagram is a correct representation of the Keynesian model. The first diagram shows the ADAS model from the New Classical perspective. It consists of a vertical LRAS curve at Yf, and the AD and SRAS curves. Although the SRAS curve in the diagram you provided is shaped like the Keynesian AS, you should not mistake them to be the same thing - you can very well illustrate the SRAS as a straight diagonal line instead (as in the diagram below). In fact, drawing the SRAS as a diagonal is what's in most IB economics text books. So, does this mean that Keynesian ADAS diagram does not need to distinguish between short run and long run? Reply Link to post Share on other sites More sharing options...
Natasha Posted October 20, 2016 Report Share Posted October 20, 2016 2 hours ago, Throne said: So, does this mean that Keynesian ADAS diagram does not need to distinguish between short run and long run? That's right. This information should've been noted in most textbooks! Reply Link to post Share on other sites More sharing options...
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