2.3.1- Characteristics of AS

Question 1

What is aggregate supply

Answer 1

shows the level of output in the whole economy at a given level of price (sun of all the industry’s supply curves in an economy)

Question 2

what happens in the mass unemployment section of the keynesian LRAS curve

Answer 2

economic depression or recession,
lack of demand,
unemployment of resources,
economy within PPF,
excess supply of labour,
can increase output with a upwards pressure on wages and prices but wages may be sticky downwards

Question 3

what happens in the curved section of keynesian LRAS curve

Answer 3

economy nears to capacity
trade off between unemployment and inflation
wages and prices and costs rise
factors become scarce leading to bottleneck inflation

Question 4

What happens in vertical section of Keynesian LRAS curve

Answer 4

full employment
economy operating at full capacity
on PPF
cannot increase output so an increase in demand is purely inflationary

Question 5

What is a movement along the AS curve caused by

Answer 5

shift in AD, new equilibrium will be established

Question 6

What causes left and rightward shifts in AS

Answer 6

Factors that affect productivity,
e.g education, training, tech advancements, gov policies, specialisation, incentives to work

Question 7

What causes up and downward shifts in AS

Answer 7

Factors that change costs in an economy
e.g changes in wage rates, costs of raw materials, taxes on g/s, exchange rates