After school assessment revision

Question 1

What is aggregate supply ?

Answer 1

The quantity of goods and services that producers are willing to supply at a given price

Question 2

What is short run aggregate supply ?

Answer 2

Relationship between planned national output and general price level ( SRAS )

Question 3

What does SRAS show us ?

Answer 3

It shows how much output the economy can generate in the short run at each price level .

Question 4

What will a rise in general price do to supply ?

Answer 4

This would stimulate an expansion of supply

Question 5

What will a fall in general price do to supply ?

Answer 5

A contraction of supply would follow

Question 6

What is the main reason for a cause in the shift in SRAS

Answer 6

The cost of resources to produce goods and services E.G unit wage costs

Question 7

Why does the supply curve move upwards ?

Answer 7

There is higher profit for G/S.
This makes outputs more profitable and enables business to expand production by hiring extra labour and resources

Question 8

What causes shifts in SRAS ?

Answer 8

Changes in resource prices - (Wage costs , labour productivity , Raw materials )

Business taxes , subsidies , legislation and import costs - (VAT , costs of meeting regulation , changes in subsidy scales)

Supply shocks - (Natural disaster)

Question 9

What are some external factors which may affect aggregate supply ?

Answer 9

World oil + gas prices
Energy prices
Food prices
Import tariffs and quotas

Question 10

What is long run aggregate supply ?

Answer 10

The relationship between price level and real GDP

Question 11

What is the difference between SRAS and LRAS ?

Answer 11

LRAS does not depend on price , SRAS is upwards sloping instead

Question 12

What does an outward shift in LRAS show us ?

Answer 12

Shows a rise in productive potential

Question 13

What can affect the position of the LRAS curve on a diagram ?

Answer 13

Anything that improves the quality and quantity of the production factors

Question 14

What causes an increase in the LRAS curve ?

Answer 14

Changes in :

supply of labour
stock of national inputs
the efficiency of allocation
quality of factor inputs
tech
institution systems ( banks )

Question 15

What does an outward shift of LRAS signify ?

Answer 15

An increase in long run potential output and employment
High levels of LRAS signifies real economic growth

Question 15

What is productivity ?

Answer 15

The measure of efficiency of the production process

Question 16

What is the equation for output ?

Answer 16

Factor inputs + Factor productivity

Question 17

Why is high productivity good ?

Answer 17

Higher productivity allows a business to pay higher wages and achieve greater profits too .

Question 18

How does improved productivity benefit the UK ?

Answer 18

Lower unit costs
Higher gains in AS
Lower unemployment in the long term
More competitive for exports
Higher business investment

Question 19

What does the Keynesian curve show us ?

Answer 19

SRAS is elastic when spare capacity is high

Elasticity of SRAS falls as output increases

When SRAS becomes perfectly inelastic - the economy is at full capacity

Question 20

What does an increase in AD do to AS ?

Answer 20

It causes an increase in AS and a higher equilibrium point of national output / increases employment too

Question 21

What does a decrease in AD do to AS ?

Answer 21

It causes a contraction of and a lower equilibrium level of national output

Question 22

What does an increase in AS do to the AD curve ?

Answer 22

It causes an expansion of AD and a higher equilibrium level of national output ( could be caused by lower unit costs which helps increase profits )

Question 23

What are some causes of an inward shift of LRAS ?

Answer 23

Outward labour migration
Decline in productivity via a recession
Loss / reduction in factor inputs
Effects of national output