Aggregate Supply Flashcards
1
Q
Why does the SRAS slope upwards?
A
- increase output in short run requires paying workers overtime (overtime pay expensive)
- ^^ no time to hire new workers
- this increases costs and thus prices
2
Q
What happens to SRAS when price level goes down?
A
contraction in SRAS (real GDP decreases moving us along supply curve)
3
Q
What do neoclassicists believe?
A
there will be no spare capacity in the long run, hence the shape of the curve
4
Q
What shifts SRAS?
A
cost of production
5
Q
What shifts LRAS?
A
quality / quantity (productivity)
