Macroeconomics Question

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Discus: SAT/ACT Tests and Test Preparation: May 2004 Archive: Macroeconomics Question
By Sosodef (Sosodef) on Sunday, May 02, 2004 - 05:51 pm: Edit

in 1981, factories utilized 79 percent of their capacity and in 1982 factories utlized 71 percent of their capacity. In whcih year do you think the economy found itself on a steeper portion of its aggregate supply curve? Why?

By Sosodef (Sosodef) on Sunday, May 02, 2004 - 06:05 pm: Edit


By Relinquo1 (Relinquo1) on Sunday, May 02, 2004 - 06:06 pm: Edit

1981, because the higher the employment, the steeper the curve. It's the law of Diminishing Marginal Returns I think, increasing employment when you already have high employment is inflationary, while if you have low employment, it expands production with lower inflation.

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