Ad And AS Plus The Level Of Econ Activity (2)

Question 1

Relationship between money wage rates and AS

Answer 1

If money wage rates increase, firms costs are raised and the incentive to supply falls.

SRAS shifts left

Question 2

Relationship between business taxation and AS

Answer 2

A rise in business tax will reduce the profit at each and every price level.

SRAS shifts left

Question 3

Relationship between productivity and AS

Answer 3

An increase in productivity lowers firms costs

SRAS shifts right

Question 4

Relationship between raw material prices and AS

Answer 4

A rise in the prices of raw materials raises firms costs

SRAS shifts left

Question 5

Relationship between interest rates and AS

Answer 5

A rise in interest rates makes borrowing more expensive, raising firms costs

SRAS shifts left

Question 6

Natural rate of unemployment

Answer 6

Rate of unemployment that is consistent with a stable rate of inflation

Question 7

4 quantity factors to change the LRAS curve or the PPC

Answer 7

1. Increase in working population
2. Discovery of new raw materials
3. Increased factor mobility
4. Increased investment

Question 8

5 Quality changes in the LRAS and the PPF

Answer 8

1. Improvement in technology
2. Improvement in productivity
3. Enterprise
4. Economic incentives
5. Improvements in the institutional structure of the economy