2.3.1 And 2.3.2- AS

Question 1

What is aggregate supply?

Answer 1

The volume of goods and services produced within the economy at a given price level

Question 2

Why is the curve upward sloping?

Answer 2

Firms are willing to supply more only at high prices prices because they need more employees or hours worked

Question 3

What is short run?

Answer 3

When at least one factor of production is fixed and can’t be changed

Question 4

What is long run?

Answer 4

When all factors of production are variable

Question 5

What are the factors influencing short run AS?

Answer 5

-changes in costs of raw materials and energy
-changes in exchange rates
-changes in tax rates

Question 6

How do changes in costs influence short run AS?

Answer 6

Increases costs of projection so will shift left

Question 7

How do changes in exchange rates influence short run AS?

Answer 7

A weaker pound will lead to an increase in the price of imports so SRAS will decrease as production becomes more expensive

Question 8

What is an example of SRAS shifting due to changes in exchange rates?

Answer 8

After Brexit, the uk experienced inflation cause by the fall in the pound

Question 9

How do changes in tax rates influence short run AS?

Answer 9

Tax rates increase the costs of production so causes a fall in SRAS