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Keynesian AS curve

Keynesian economists believe that supply is the same in the short and long term and that there is no need for a separate SRAS curve. The Keynesian supply curve is perfectly elastic at low levels of real output and transitions to a perfectly inelastic curve as real output approaches the full employment level.

The diagram below illustrates the Keynesian view of the aggregate supply curve. Unlike the classical view, the keynesian view suggests that the supply curve is not always inelastic at every point i.e. there is a point in the economy when spare capacity exists and firms can increase production (elastic part of curve). But there is also a point in which full capacity is reached and therefore production cannot be changed (inelastic part of curve). This logic is summarised in the table next to the graph.

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