Unit 3 February 27

• Reason why prices tend to be Sticky or inflexible in a demand direction
• Fear of price war
• Wage control 
• Menu cost
• Moral effort and productivity 
• Range 1 ( Horizontal Range )
• output is low relative to the economies fully outpt
• Unemployment increases and so does GDPr
• Range 2 ( Intermediate Range )
• output expands as spending increases 
• Range 3 ( Vertical/ Classical range )
• In the long run the aggregate supply curve is vertical, because the only effect of increase of AD when we are already at full employment an increase in the price level 
• Firms can respond to increase in demand by increasing output