Unit Three: AD and AS Graph Ranges

AS Graph Ranges

Keynesian (Recession): 

• Price- Fixed
• Wages- Fixed
• Employment Level- Flexible
• Implications- Output Depends on Changes in Employment Level

Intermediate:

• Prices- Flexible
• Wages- Fixed
• Employment Level- Flexible
• Implications- Output Depends on Changes in Price and Employment Level

Classical (Inflation):

• Price- Flexible
• Wages- Flexible
• Employment Level- Fixed
• Implications- Output is Independent of Changes in Price Level

VOCABULARY

• Nominal Wages: The amount of money received by a worker per unit of time (Paid by hour, day, etc.)
• Real Wages: The amount of goods and services a worker can purchase with their nominal wages
• Purchasing Power of Nominal Wages
• Sticky Wages: Nominal wage level is set according to an initial price level, and does NOT vary due to labor contracts or other restrictions