2.3.2 Short Run AS ✅

Question 1

What is short run aggregate supply?

Answer 1

Supply when at least one factor of production is fixed.

Question 2

What causes a shift in short run AS?

Answer 2

change in production cost for all firms.

Question 3

Name the factors that effect short run AS?

Answer 3

• Change in exchange rates (value of the pound).
• Change in wage rates.
• Change in costs of raw materials + energy.
• Change in tax rates.

Question 4

How would change in exchange rates influence SRAS?

Answer 4

Appreciation = cheaper import of raw goods (lower cost of production) short run as shifts right.
Depreciation = more expensive to import raw goods (higher cost of production) short run as shifts left.

Question 5

What are supply side shocks and how can they effect SRAS?

Answer 5

Event that causes an unexpected increase in cost of production shifting SRAS left.

Question 6

How can changes in tax rates effect SRAS?

Answer 6

Tax=shift left (higher cost of production).
Subsidy=shift right (lower cost of production).