Keynes’ Law and Say’s Law in the AD/AS Model

Critical Thinking Questions

Explain why the short-run aggregate supply curve might be fairly flat in the Keynesian zone of the SRAS curve. How might we tell if we are in the Keynesian zone of the AS?

Explain why the short-run aggregate supply curve might be vertical in the neoclassical zone of the SRAS curve. How might we tell if we are in the neoclassical zone of the AS?

Why might it be important for policymakers to know which in zone of the SRAS curve the economy is?

In your view, is the economy currently operating in the Keynesian, intermediate or neoclassical portion of the economy’s aggregate supply curve?

Are Say’s law and Keynes’ law necessarily mutually exclusive?