Why Price Level Rise Only After Employment?
in Economics
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According to Keynes, Price Level Rise Only After Full Employment. Why?
in Economics
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Price Level does not rise before full employment, because Aggregate Supply assumed to be perfectly elastic. Prior to full employment, Aggregate Supply tends to rise proportionate to any rise in Aggregate Demand.

Accordingly, Price Level remains constant, but after full employment is reached, Aggregate Supply stops rising in response to a rise in Aggregate Demand. Accordingly, price level tends to rise.

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