4. How the Macroeconomy Works - Aggregate Supply

Question 1

What factors will affect the position of the short run aggregate supply curve?

Answer 1

Supply side shocks-The costs of production;Wages, raw materials, oil prices, business taxes and import prices.

Question 2

If costs of production fall..

Answer 2

SRAS curve will shift to the right

Question 3

If costs of production rise..

Answer 3

SRAS curve shifts to the left

Question 4

What factors affect the position of the LRAS curve?

Answer 4

Levels of labour productivity Investment levelsQuality of InfrastructureQuantity of labourTechnology and research and developmentCompetition levelsNew resource discoveries

Question 5

What does the long run aggregate supply curve represent?

Answer 5

The level of supply an economy can produce with full use of all of its factors of production at a sustainable level.