2.3.1 The Characteristics of AS

Question 1

What is the short-run aggregate supply curve (SRAS)?

Answer 1

A curve showing how much output there would be by firms in the short run given the price level

Question 2

What is the long-run aggregate supply curve (LRAS)?

Answer 2

A curve that represents the long run potential level of output from an economy given the price level

Question 3

Inflation, would cause what along the supply curve?

Answer 3

Expansion

Question 4

Deflation, would cause what along the supply curve?

Answer 4

Contraction

Question 5

Why is the supply curve upward sloping?

Answer 5

Because if output increases, firms will have to pay more to produce their products, pushing up their prices. Higher prices also leads to greater profit and enables business to expand

Question 6

What is meant by aggregate supply?

Answer 6

The quantity of goods and services in an economy that producers are willing to supply at a given price