aggregate supply

Question 1

sras shifts when

Answer 1

cost of production changes

Question 2

increase in productivity and sras

Answer 2

will reduce costs in the short run, shifting sras downwards

Question 3

increase in productivity and lras

Answer 3

increase in long run supply

Question 4

exchange rates and SRAS

Answer 4

if exchange rate falls, imported goods will rise in price. wil lead to an increase in prices throughout the economy

Question 5

effects of supply shocks 3

Answer 5

• inflation, so rise in price
• decrease in output
• cld cause stagflation

Question 6

shift in lras (5)

Answer 6

technological advancements
productivity
education and skills
government regulation and tax
competition policy

Question 7

classical view

Answer 7

markets tend to correct themselves fairly quickly when pushed into disequilibrium by a shock

Question 8

keynesian view

Answer 8

at low output levels.
there’s spare capacity, and businesses can increase production without significant price hikes. As the economy approaches full employment, the LRAS becomes vertical, similar to the classical view. Further increases in output then lead to inflation rather than more production