2.3.1 Aggregate Supply Flashcards
1
Q
What is the definition of Aggregate Supply?
A
total output supplied in an economy at a given price level over a given period of time
2
Q
What are the axes of an AS diagram?
A
- X = Price level
- Y = RNO
3
Q
How is the ‘short run’ defined in economics?
A
all factors of production are fixed except for labor
4
Q
Why is the SRAS curve upward sloping
A
Increase in price level, so there is an increase in the output firms are willing to supply
5
Q
What might cause such an expansion?
A
- technological advances
- increase in subsidies
- lower unemployment
- economic growth
- increase in the productive capacity
6
Q
What might cause such a contraction?
A
- Increase in unemployment
- lower economic growth
- decrease in the production capacity
7
Q
What are the three conditions (shifters) of SRAS?
A
- changes in costs of raw materials and energy
- changes in exchange rate
- change in tax rate
8
Q
Why does AS classically take a different shape in the short run to the long run?
A
- In the short run, all factors of production are fixed, except for labor which can be hired to cover increases in AD
- In the long run, all factors of production are variable and can be increased over time
9
Q
Give 6 factors which influence the position of LRAS
A
- improvement in healthcare and education
- demographic changes
- changes in government regulation
- increasing factor mobility
- increase in technology
- increase in competition
