Aggregate Supply

Question 1

Define Aggregate Supply

Answer 1

It is the volume of goods and services produced in an economy at a given price level

Question 2

Why is aggregate supply upward sloping

Answer 2

As to increase volume of production, working hours or investment must increase, this cost will be past onto consumers

Question 3

Difference between short run and long run

Answer 3

In the short run, at least one factor of production is fixed

Question 4

What causes a shift in SRAS

Answer 4

A change in the cost of production

Question 5

Factors that cause a shift in SRAS

Answer 5

• changing cost of raw materials
• changes in exchange rates
• changes in tax rates
• changes in wage rates

Question 6

What are the different shapes of LRAS

Answer 6

Classical and Keynsians

Question 7

What is the difference between classical and keynsians LRAS

Answer 7

Classical shows full capacity (straight line)

Question 8

What factors affect the LRAS

Answer 8

Improvements in the quality and quantity of the factors of production:
- technological advances
- increase in relative productivity
- investments in education and training
- changing in government regulation