2.3.2

Question 1

What is short run aggregate supply?

Answer 1

The relationship between planned national output and the general price level.

Question 2

What does a rise in the general price level do?

Answer 2

Should stimulate an expansion of aggregate supply as businesses respond to profit motive

Question 3

Why is the short run aggregate supply curve upwards sloping?

Answer 3

As higher prices for goods/services make output more profitable and enable businesses to expand production by hiring extra labour/resources.

Question 4

What does a fall in the general price level do to aggregate supply?

Answer 4

Causes a contraction

Question 5

What causes an inward shift in the short run aggregate
supply curve.

Answer 5

Production costs rise

Question 6

What causes an outward shift in the short run aggregate supply curve?

Answer 6

Production costs fall.

Question 7

What factors cause shifts in the short run aggregate supply curve?

Answer 7

-Change in resource prices
-Business taxes, subsidies, regulations and imported costs.
-Cost of imported components
-Unexpected supply shocks that affect the price of raw material.

Question 8

What are the external factors affecting aggregate supply?

Answer 8

-World oil and gas prices
-Energy prices/costs
-Other mineral / metal prices
-Foodstuff prices (coffee)
-Import tariffs/ quotas