In the graph, a dashed red line is at P 1 on the midway of the vertical axis. Aggregate supply (AS) and aggregate demand (AD 1) intersect at (510 dollars, P 1). AS increases in a concave up manner. AD 1 curve decreases in a concave up manner. Left to AD 1, at P 1, a point is marked on AD 2 at 490. A dashed curve is just right of and parallel to AD 2, and the distance between both curves is labeled 5 billion dollars initial increase in spending. Another right arrow indicates AD 2 shifting all the way back to AD 1 and the distance between the curves is labeled full 20 billion dollars increase in aggregate demand. All data are approximate.

Question

In the graph, a dashed red line is at P 1 on the midway of the vertical axis. Aggregate supply (AS) and aggregate demand (AD 1) intersect at (510 dollars, P 1). AS increases in a concave up manner. AD 1 curve decreases in a concave up manner. Left to AD 1, at P 1, a point is marked on AD 2 at 490. A dashed curve is just right of and parallel to AD 2, and the distance between both curves is labeled 5 billion dollars initial increase in spending. Another right arrow indicates AD 2 shifting all the way back to AD 1 and the distance between the curves is labeled full 20 billion dollars increase in aggregate demand. All data are approximate.
Which element of this figure is considered inflexible?
Multiple choice question.

AS

AD1

P1

AD2

GPT-4o mini · Answer

In the context of the graph you've described, the element considered inflexible is typically AS (Aggregate Supply).

In economic models, Aggregate Supply can be thought of as relatively inflexible in the short run, especially if it is represented as upward sloping or if the increase is concave up. This indicates that prices may not adjust immediately or fully to changes in aggregate demand. Conversely, the Aggregate Demand (AD) curves can shift relatively more easily in response to changes in spending or other demand-side factors.

Therefore, the correct answer is AS.