2.3.2 Short-run AS

Question 1

Changes in costs of raw materials and energy on SRAS:

Answer 1

• An increase in the cost of raw materials and energy increases the cost of production. This means the SRAS curve will shift left as it will cost more to make the same amount of goods

Question 2

Changes in exchange rates on SRAS:

Answer 2

• An increase in the cost of raw materials and energy increases the cost of production. This means the SRAS curve will shift left as it will cost more to make the same amount of goods and vice versa

Question 3

Changes in tax rates: (2)

Answer 3

• Taxes increase the cost of production and thus they cause a fall in SRAS, shifting it to the left.
• Subsidies shift it the curve right as they decrease costs.

Question 4

What is a supply-side shock?

Answer 4

an event that causes an unexpected increase in costs or disruption to production