Aggregate Supply

Question 1

Aggregate supply

Answer 1

Sum of total goods and services that all industries in an economy will produce at every given price level

Question 2

Short term aggregate supply factors of production

Answer 2

Prices are fixed ie wage rate

Question 3

Change in price level causes

Answer 3

A shift along the SRAS curve

Question 4

Causes of a SRAS shift (4)

Answer 4

Change in wage rates, costs of raw materials, import costs and indirect taxes/subsidies

Question 5

Short run equilibrium for SRAS

Answer 5

Where SRAS = AD

Question 6

LRAS two models

Answer 6

New classical (vertical), keynesian view (curve)

Question 7

New classical LRAS curve ideology

Answer 7

Market forces are very efficient, little to no government inteventions, perfectly vertical line at full level of employment, represents potential output of economy, based on quantity and quality of factors of production

Question 8

Keynesian view LRAS curve ideology

Answer 8

Government has a role in managing the economy, curve becomes more elastic, from perfectly elastic to perfectly inelastic

Question 9

Shift of LRAS

Answer 9

Due to change in potential economic growth

Question 10

Factors of production (3)

Answer 10

Land, labour/entrepreneurship, capital