Aggreagte Supply

Question 1

What is aggregate supply?

Answer 1

The quantity of real GDP which is supplied at different price levels in the economy

Question 2

Short run AS

Answer 2

• the period of time when at leat one factor is fixed
• only cover period immediately after a change in the price levels - shows the planned output of an economy when prices change while costs of production etc are kept constant

Question 3

LRAS

Answer 3

• all factors of production are variable
• shows potential supply and productive potential
• vertical curve in classic model - supply assumed not to change as price levels changes

Question 4

Factors affecting SRAS

Answer 4

Shifts when there are changes in conditions of supply:
-costs of raw materials and energy
- change in currency
- tax rates ( indirect )

Question 5

Keynesian LRAS

Answer 5

• suggests price levels is fixed until resources are fully employed
• horizontal section shows output and price levels is when resources not fully employed - spare capacity
• vertical section - when resources are fully employed
• output changes not inflationary until all resources are fully employed

Question 6

Classical LRAS

Answer 6

• output fixed at each level
• all FOP fully employed in the long run
• change in AD only makes change in price levels and not to national output ( real GDP )

Question 7

Factor influencing LRAS

Answer 7

Influenced by changes that affect quality or quantity of the FOPs:
- technological advances
- changes in productivity
- changes in education and skills
- changes in gov regulations
- demographic changes and migration
- competition policy