An adjustment "asymmetry" in aggregate supply is
A)the concave shape of the AS curve.
B)the convex shape of the AS curve.
C)the difference in speed of a rightward shift versus a leftward shift (when wages adjust to output gaps).
D)the difference in speed of increases in factor prices versus wage rates (when wages adjust to output gaps).
E)the difference in speed of decreases in output levels.

Question

Quizplus · Accepted Answer

An adjustment asymmetry in aggregate supply refers to the difference in speed of a rightward shift versus a leftward shift when wages adjust to output gaps. Specifically, it is the idea that when there is an increase in demand for goods and services, wages and prices may not adjust as quickly as when there is a decrease in demand. This leads to a slower adjustment and a temporary decrease in output levels. This asymmetry is reflected in the AS curve, which tends to be steeper in the short run, reflecting a slower adjustment to changes in demand.

An Adjustment "Asymmetry" in Aggregate Supply Is