Understanding the Differences Between LRAS and Keynesian Aggregate Supply Curve

The video tutorial explains the classical and Keynesian aggregate supply curves. The classical long-run aggregate supply (LRS) curve is vertical, indicating it is perfectly inelastic and represents the economy's full productive capacity. Shifts in the LRS curve occur due to changes in the quantity or quality of production factors. The Keynesian aggregate supply curve is more flexible, with sections that vary in elasticity. It can shift similarly to the LRS curve, affecting the point where it becomes vertical.

What is the shape of the classical long-run aggregate supply curve?

• Horizontal

• Diagonal

• Vertical

• Curved

What does an outward shift in the classical LRS curve indicate?

• A decrease in price level

• A decrease in productive capacity

• An increase in inflation

• An increase in productive capacity

How does the Keynesian aggregate supply curve initially behave?

• It is circular

• It is diagonal

• It is horizontal

• It is vertical

In the Keynesian model, what happens as the economy approaches full employment?

• The curve becomes more elastic

• The curve becomes more inelastic

• The curve becomes circular

• The curve remains horizontal

What can cause both the classical and Keynesian aggregate supply curves to shift?

• Changes in international trade

• Changes in government policy

• Changes in consumer preferences

• Changes in the quantity or quality of factors of production