2.3.3 - Long Run Aggregate Supply

Question 1

Factors influencing LRAS

Answer 1

• technological advances
• changes in relative productivity
• changes in education and skills
• changes in government regulations
• demographic changes and migration
• competition policy

Question 2

What is productivity

Answer 2

• productivity measures the efficiency of the production process
• in the long run productivity is a major determinant of economic growth and inflation

Question 3

How can productivity be measured

Answer 3

• output per worker employed
• output per person hour
• value added from each extra factor input employed

Question 4

Significance of increased productivity

Answer 4

• lowered inflation
• higher economic growth
• lower unemployment
• improved balance of trade
• higher business investment
• improved government fiscal balance

Question 5

Economic benefits of net inward migration - shift LRAS curve outwards

Answer 5

• migrants provide fresh skills and higher labour productivity
•