Answer :
Final answer:
The portion of the SRAS curve where GDP is below potential but not as severely as in the Keynesian zone is called the Intermediate Zone. This area is characterized by an upward-sloping SRAS curve that indicates increasing production with rising prices. It represents a moderate economic situation rather than deep recessions or full employment conditions.
Explanation:
Understanding the Intermediate Zone of the SRAS Curve
The portion of the Short-Run Aggregate Supply (SRAS) curve where the economy's GDP is below its potential but not extremely low, as seen in the Keynesian zone, is known as the Intermediate Zone. In this zone, the SRAS curve is upward-sloping, indicating that as prices increase, firms are willing to produce more goods and services; however, it does not reach a vertical position like in the Neoclassical Zone where the economy is at full employment.
The Intermediate Zone reflects various economic conditions, such as when unemployment is moderate and output is less than what the economy can sustainably produce. This situation allows for some price adjustments while still indicating that there is room for improvement in the economy, such as increasing investments or stimulation through policy changes.
For example, during a recession that doesn’t plummet to the depths of a deep economic downturn, regions might experience growth in certain sectors, demonstrating characteristics of the Intermediate Zone rather than falling straight into the Keynesian zone where prices and output might be too low to promote any supply.
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