Velocity Wanted: Sticky Prices yet Flexible Price Level 02
If history is any guide, there are two types of masters: 1) Type one: He explains simple things in as complex and complicated a way as possible. Not to mention, he speaks a language alien to the residents innocent. 2) Type two: She explains complex and complicated things in the simplest way possible in vernacular friendly to most every listener. The Sophist. The SRAS curve (for short-run aggregate supply) is horizontal because all prices are sticky . The LRAS curve (for long-run AS) is vertical because all prices are flexible . In the medium run , some prices must be sticky while the rest flexible. Now, for the sake of convenience, suppose the economy comprises of two products, widget and gadget . Further on, the price of widget is fixated at 12 dollars while the price of gadget is at the flexible P ; the natural level of output is ...