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T3 Q3
May 12, 2016 20:04:20 GMT
Post by Tom on May 12, 2016 20:04:20 GMT
For question three in the third tutorial, why is the AS curve horizontal when focusing on the IS-LM model?
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T3 Q3
May 12, 2016 21:39:34 GMT
Post by Oliver on May 12, 2016 21:39:34 GMT
Hi,
This is the implicit assumption in the IS-LM model. Prices are fixed and the supply side of the economy will produce as much output as is demanded. Hence, a flat AS curve.
Best
Oliver
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