Aggregate Supply Flashcards
What are the factors of aggregate supply
Nominal wages, costs of production, level of technology, productivity, exchange rates, immigration
What is aggregate supply
The total supply of all sectors in the economy at each price level
Increase in nominal wages
Costs of production^ = AS↓ = CPI
(nominal wages are wages before income tax has been taken out of it so an increase in this means firms have to pay higher wages to their workers)
Increase in costs of production
= AS↓ = CPI
Increase in import prices
= Increased costs of production
Decrease in productivity
= AS↓ = CPI
Decrease in level of technology
= decrease in productivity
Decrease in exchange rates (NZ dollar gets weaker)
= M↓ = costs of production^ = AS↓ = CPI
Increased immigration
= more skilled people coming in to NZ = productivity^ = AS^ = DECREASE in cpi = deflation
