Questions tagged [aggregate-supply]

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8 votes
3 answers

Aggregation of the closure property of a production set

Consider an economy with finitely many goods $I$ and factors $F$. For each good $i$, let $Y_i \subset \mathbb R^I \times \mathbb R^F_{\geq 0}$ denote a production set for $i$. Assume each $Y_i$ has ...
5 votes
1 answer

Deriving aggregate output from labor demand and supply

I was reading the following paper: I got stuck at equation (7) The firm's production function is $Y_{i}=A_{i}L_{i}^{\alpha}K_{i}^{\eta}T_{i}^{1-\alpha-\eta}...
  • 165
3 votes
0 answers

Is there alternative to the monetary tighetning when the inflation is caused by scarcity (supply-side shocks)?

Current economic crisis is created by sharp reducing shocks to the supply side - bad economic weather, political restrictions to the trade, service availability reduction in the transportation sector. ...
  • 395
2 votes
1 answer

The new Keynesian IS curve: What determines output?

The New Keynesian IS curve can be described by the following (log-linearisation around the steady-state):$$y_t=E_t(y_{t+1})- \frac{1}{\theta}(i_t - E_t\pi_{t+1}-\rho)$$ where $\displaystyle\frac{1}{\...
1 vote
1 answer

From the aggregate supply equation to the definition of inflation rate

By definition the inflation rate is $$\pi=\dfrac{P-P_{-1}}{P_{-1}}\cdot100\%$$ or could be defined in terms of the consumer price index CPI, but in this case I think the former is the one to consider....
1 vote
0 answers

PPC's real output value

Does every point on the PPC have the same real output value? If not, then what point on the PPC does the long-run aggregate supply represent? LRAS is supposed to be vertical on the real GDP if the ...
0 votes
0 answers

Effect of a rise in AS and a larger rise in AD on price level and output

In the new classical model of AD and AS, if there is a rightward shift in both AD and AS, but the increase in AD is larger, will the growth in the price level be greater than the growth in output? ...