Aggregate Supply

Question 1

What does Classical SRAS look like and whats it determined by

Answer 1

Upward sloping and the position of SRAS is determined by the cost of production in an economy

Question 2

Generic Costs of Production

Answer 2

Wages, raw materials, oil price, business taxes, import prices

Question 3

Classical LRAS

Answer 3

Vertical to represent one level of output the economy will always produce at in the long term(YFE)

Question 4

What does LRAS represent

Answer 4

represents maximum level of output an economy can produce at, using all factors of production at sustainable levels.

Question 5

At YFE when

Answer 5

The economy is at the natural rate of unemployment

Question 6

Shift LRAS when

Answer 6

Changes in quantity or quality of the factors of production or productive efficiency

Question 7

Keynesian Approach to the LRAS curve

Answer 7

Only LRAS, economy can be producing at less than YFE in the long term

Question 8

Keynesian Graph shape

Answer 8

Bendy to represent the levels of spare capacity, therefore AD can grow without causing inflation due to spare capacity being used up.