4.2.2.5_-_Determinants_of_short-run_aggregate_supply Flashcards
What is a closed economy?
An economy with no overseas trade
What causes the SRAS curve to shift?
Changes to the conditions of supply, mainly changes to the price level and production costs.
What does a reduction in the costs of production mean?
At the same price level more output can be produced, so the SRAS curve will shift to the right.
What are the main changes in the costs of production?
wage rates, raw material prices, taxes an firms pay, exchange rates and efficiency levels
What could a sudden decrease in SRAS (leading to a price increase) be caused by?
Supply-side shocks. E.G. natural disaster or war
Why is the SRAS curve upwards sloping?
It shows that with an increase in the price level, there is an increase in the amount of output firms are willing to supply
What does it mean if SRAS is price inelastic?
The SRAS curve slopes steeply upwards
What does it mean if SRAS is price elastic?
The SRAS curve would be less steep
