posted by Dave on .
Will the aggregate quantity of goods and services demanded become more
sensitive or less sensitive to changes in the price level if an economy
becomes closed (that is, as foreign trade disappears)? In terms of the
AD/AS diagram, will the AD curve become steeper or flatter?
Think it through, what would happen, from a producer's point of view, if his foreign competitors suddenly disappeared? Alternatively, what is the shape of the demand curve, from a producers point of view, of a producer in a perfectly competitive market? in a monopolistic competition market?