Discuss why the aggregate supply (AS) curve is relatively flat within the low ranges of aggregate output and relatively vertical within the ranges of high aggregate output. Which part of the AS curve fiscal policy works better and why?

Answer rating: 100% (QA)

Answer 1 The aggregate supply curve is relatively flat in the low ranges of aggregate output becauseat this stage any company can only increase the amount of labour but the capital cannot be increased because capital which consists of assets like buildings machinery take time to be implemented and labour wages are assumed to be constanthence any increase in labour results only in the increase of quantity but not the priceHence the aggregate supply curve is relatively flatter in the initial stage 2 The aggregate supply curve is relatively vertical in the ranges of high aggregate output because ... View the full answer