2.3 Aggregate Supply

Question 1

what is aggregate supply?

Answer 1

its the total output of goods and services that firms in an economy are willing and able to supply at a given price level.

Question 2

What is short run AS?

Answer 2

its the relationship between planned national output(GDP) and the general price level

Question 3

what is one feature of the AS curve

Answer 3

its a line sloping upwards

Question 4

what causes the sras curve to contract and expand?

Answer 4

if expansion occurs, demand rises and prices stimulate expansion because producers respond to the profit motive.

if contraction occurs price level will fall and demand causing short run as producers to cut supply as there is less profit

Question 5

what cause shifts in a SRAS curve?

Answer 5

shift right = cost of production decreases supply increases.

shift left = cost of production increases which leads to fall in supply

Question 6

factors that cause shift is SRAS curve?

Answer 6

• wage rates
• Raw material prices
• Taxation
  -productivity amount of output
• exchange rate(increase price less decrease price rise)

Question 7

what is Long run AS?

Answer 7

it represents the maximum possible output when all factors of production are fully and efficiently employed.

Question 8

what is labour productivity?

Answer 8

its a measure of efficiency indicated by output per person employed

Question 9

what is infrastructure?

Answer 9

physical capital

Question 10

what are the factors influencing LRAS?

Q2 CELL/productive efficiency

Answer 10

-advances in the state of technology

-productivity of labor and capital

-enterprise (product process innovation from R and d high rate of business starts up)

-capital investment -changes in natural resources

-changes in stock of capital

-infustructure eg transport infrustructure reduces costs

Question 11

what is Yfe?

Answer 11

full employment level of output

represents the maximum level of output an economy can produce sing all factors of production at sustainable levels.