Aggerate supply Flashcards
what is the definition of aggerate supply
the quantity of goods and services that producers in the economy are willing and able to supply at a given price
when does SRAS occur
the period of time when at least one factor of production Is fixed and cannot be changed
when does LRAS occur
when all factors of production are variable
what causes a shift in SRAS
cost of production, e.g changes in resource prices, business taxes, subsidies, regulations and import costs
what causes a shift in LRAS
any changes in the quality or quantity of cell
what is labour productivity
a measure of efficiency indicated by output per person per hour
what does LRAS represent
the maximum possible output when all factors of production are fully and efficiently employed, like a country’s PPF
explain the Keynesian AS curve
a non linear curve where the elasticity of AS is dependent on level of spare capacity and different stages in the economic cycle
how is a change in spare capacity represented on a Keynesian AS curve
where the curve is flat resource are not being allocated efficiently so space capacity is high, YFE is only at the point where the curve is linear
how do keynesian economists view the relation between economic growth and increased GPL
they believe that economic growth can be achieved with no inflationary pressure at the point where AS is elastic
what does the vertical shape of the classical LRAS curve represent
one level of output the economy will always produce at in the long run
what is meant by YFE
the full employment level of output representing the maximum level of output an economy can produce at using all FOP at sustained levels
Explain the reason for the shape of the Classical long-run AS curve.
Economy operates at full capacity
so there are no unused factors of production
