Aggregate Supply

Question 1

What is Aggregate supply

Answer 1

The total volume off goods and services produced within the economy at a given average price level.

Question 2

What does the SRAS curve show us?

Answer 2

The SRAS curve shows the the actual output of an economy is producing at a given price level.

Question 3

What are the main determinants of SRAS

Answer 3

1. Price level
2. The cost of production

Question 4

What does the LRAS curve show us

Answer 4

The long run aggregate supply curve shows us the potential output an economy can produce and sustain given full employment of all resources.

Question 5

What are the main determinants affecting the LRAS curve

Answer 5

1. The amount of land, labour, capital and enterprise available (Quality and quantity of resources).
2. The state of technology
3. The productivity of the factors of production.

Question 6

What direction will lower and higher costs shift the SRAS curve

Answer 6

Lower costs will shift the SRAS curve to the right.
Higher costs will shift the SRAS curve to the left.

Question 7

What are some examples of factors that change the quality/quantity of resources

Answer 7

Training, education, investment in new capital, population size.