2.3.1 - 2.3.3 aggregate supply

Question 1

aggregate supply def

Answer 1

the total output produced in an economy at a given price level over a given period of time

Question 2

2 types of AS curves

Answer 2

short run and long run

Question 3

if SRAS is price inelastic SRAS curve slopes if SRAS is price elastic SRAS curve slopes

Answer 3

• steeply upwards
• less steep

Question 4

changes in cost of production do what to SRAS

Answer 4

. reduced costs shift SRAS to the right because more output produced

Question 5

what might shift SRAS curve

Answer 5

. wage rates
. taxes firms pay
. exchange rates
. efficiency levels

Question 6

LRAS determined by

Answer 6

factors of production

Question 7

what might shift the LRAS curve

Answer 7

. investment in technology
. improvement in factors of production
. improvement in education and skill
. new resources
. improvement in health care
. changes in gov regulations
.increase in competition
. increasing factor mobility

Question 8

what shape is keynesian LRAS curve

Answer 8

L shape

Question 9

explain shape of keynesian LRAS curve

Answer 9

.low level of output AS elastic ,, spare capacity in economy so output can increase without a rise in price level

. curve slope upwards because economy is experiencing problems with supply which causes increases in costs

. curve becomes vertical when economy is at full capacity

Question 10

deterioration in factors of production causes

Answer 10

a reduction in economy’s capacity will cause the LRAS curve to shift to the left

Question 11

difference between keynesian and classical view of lras

Answer 11

classical view is that the economy will return to the long run equilibrium eventually
keynesian view is that the economy will not always return to the long run equilibrium