2.3.2

Question 1

SRAS Movement

Answer 1

Movement along the curve is caused by a change in the general price level. Extension or contraction.

Question 2

A decrease in raw material cost

Answer 2

Lowers production costs and shifts SRAS right

Question 3

Increase in Raw material prices

Answer 3

Raises production costs shifts SRAS to the left

Question 4

Increase in Taxes

Answer 4

Reduces profit margins shifts SRAS to the left

Question 5

Increase in subsidies

Answer 5

Lowers production costs shifting SRAS to the right

Question 6

Increase in wage (SRAS change)

Answer 6

SRAS will shift to the left - increase in the cost of production for firms

Question 7

Decrease in Wages

Answer 7

Rightward shift in the SRAS curve - firms will benefit from reduced cost of production

Question 8

Positive supply shock

Answer 8

Unexpected events that increase productivity or reduce cost - rightward SRAS shift

Question 9

Negative supply shock

Answer 9

Unexpected events hat increase costs - causing a left shift in SRAS.

Question 10

Appreciation of Exchange rate

Answer 10

Raw materials, capital goods and energy are cheaper reducing production costs - higher profit margins.

Question 11

Depreciation of exchange rate

Answer 11

Imported goods are more expensive - raw materials more costly, reducing AS (Aggregate Supply) causing a leftward shift in SRAS