Aggregate supply Flashcards
If a raw material becomes more limited in supply, what effect will it have on the short-run aggregate supply curve?
price of raw material will increase, so less output for same price, so SRAS shifts left
If statutory minimum wage rises, what effect will it have on the short-run aggregate supply curve?
price of labour increases, so less output for same price, so SRAS shifts left
If exchange rate rises (ie £ worth more), what effect will that have on UK short-run aggregate supply curve?
If £ worth more, an imported material costs less in £ so UK SRAS shifts right
Define natural rate of output
long-run equilibrium level of output to which monetarists belive macroeconomy will always tend
What do monetarists believe about the macroeconomy?
The macroeconomy always adjusts rapidly to full employment level of output, so monetary policy should be prime instrument for stabilising economy.
Define natural rate of unemployment
unemployment rate that will exist when economy is in long-run equlibrium
What do Keynesians believe about the macroeconomy?
that macroeconomy can settle at an equilibrium below full employment, at least in medium term
What shape is the long-run aggregate supply curve according to monetarists?
vertical line
What shape is the long-run aggregate supply curve according to Keynesians?
horizontal then curve then vertical (so like a backwards L)
If there are high levels of immigration, what effect will that have on long-run aggregate supply curve?
It will shift right
If a new technology is widely introduced, increasing efficiency, what effect will that have on long-run aggregate supply curve?
It will shift right
If roads become more congested, what effect will that have on long-run aggregate supply curve?
It will shift left, as transport costs, eg petrol / paying drivers, will increase.
What effect did Covid-19 have on the aggregate demand curve?
shifted left, eg demand for transport, leisure activities
What effect did Covid-19 have on the aggregate supply curve?
shifted left, as fewer workers (due to illness), higher costs (due to eg PPE, hand gel, extra cleaning needed)
