2.3 - Aggregate Supply

Question 1

What is aggregate supply?

Answer 1

volume of goods/services within an economy at a given price level

Question 2

Short-run AS

Answer 2

capital is fixed, only labour is variable

Question 3

Long-run AS

Answer 3

all factors are variable (input)

Question 4

Keynesian SRAS curve

Answer 4

economy can have output gaps due to market imperfections

Question 5

Classical LRAS curve

Answer 5

firms operate at full capacity

Question 6

Factors affecting SRAS

Answer 6

• increased costs of raw materials -> increased costs of production -> increased SRAS
• exchange rates -> SP -> IC -> decreased costs -> increased SRAS
• increased taxes -> increased costs -> decrease SRAS

Question 7

Factors affecting LRAS

Answer 7

• technological advancements
• increased productivity -> specialisation -> increased LRAS
• education = increased productivity
• decreased G regulations -> decreased costs
• increased migration -> increased labour
• increased competition -> increased output and efficiency -> increased LRAS