2.3 aggregate supply Flashcards
whats the direction of a SRAS diagram
left to right low to high
what is a rise in price level on the SRAS curve called
an expansion
what is a fall in price level on the SRAS curve called
a contraction
what is an increase in cost of production on the SRAS curve called
shift to the left & up
what is an decreasein cost of production on the SRAS curve called
shift right & down
how does LRAS differ from SRAS
long run- Factors of productive can be assumed to have changed & increased over time
short run- all factors of production remain fixed
what does LRAS represent
Represents the maximum possible output an economy can produce as determined by its available land, labour, capital & entrepreneurial resources
3 factors the influence SRAS
costs of raw materials & energy
exchange rates
tax rates
classical view of the AS curve
the view & the man who hypes it up
the economy will always produce the maximum that its factor resources can allow for.
adam smith
keynsian view of the AS curve
the view & the man who hypes it up
economy can be in equilibrium below full employment
john maynard keynes
classical view of the AS curve diagram
x=5 ish
straight line down
keynsian view of the AS curve
curve left to right down to up
.
.
Factors influencing LRAS
Tech advances
Changes in relative productivity
Changes in education & skills
Changes in govt regulations
Demographic changes & migration
Competition policy
