2.3.1-2.3.3 LRAS + SRAS

Question 1

What are the two types of AS

Answer 1

SRAS AND LRAS

Question 2

Define SRAS

Answer 2

Curve affected by cost of production

Question 3

What is cost of production

Answer 3

Eg. Business rates, RENT, TAX

Question 4

When to shift SRAS?

Answer 4

If cost of production falls, firms produce more , so shift RIGHT

If costs of production increase, firms make less, shift LEFT

Question 5

Define LRAS

Answer 5

Curve determined by all factors of production

Question 6

What are factors of production

Answer 6

Size of workforce, capital stock, levels of education, labour productivity

Question 7

What are the rules of LRAS

Answer 7

If quantity or quality of production rises, shift RIGHT

Vice versa

Question 8

What is productive potential

Answer 8

Max amount of goods and services an economy is capable of producing given the existing resources

Question 9

What does keynesian LRAS show

Answer 9

spare capacity on the run up to maximium capacity.

0 gradient to increasing gradient

Question 10

What does spare capacity mean

Answer 10

It is the under utilisation of factors of production.