Aggregate Supply And Demand

Question 1

Aggregate supply

Answer 1

Productive capacity of economy
(YFE)

Question 2

LRAS increase on price level (Keynesian)

Answer 2

Reduce as economy can operate at higher output more efficiently due to factors like

Productivity increase
Technological advantages
Educated and skilled workforce

Question 3

Short run aggregate supply

Answer 3

Changes on cost to produce

Wages
Raw materials
Oil price

Question 4

Aggregate demand shifts

Answer 4

AD shifts when C I G or X and M change

Question 5

Determinants of consumption

Answer 5

Interest rates
Level of real disposable income
Consumer confidence

Question 6

Determinants of investment

Answer 6

Interest rates
Business confidence
Taxation

Question 7

National debt

Answer 7

Total stock of debt over time

Question 8

Shifts in AD effects (outwards)

Answer 8

Growth increases
Unemployment decreases
Inflation increases
Trade position worsens

Question 9

Shifts in lRAS (outwards)

Answer 9

Growth increases
Unemployment decreases
Inflation decreases
Trade position strengthens

Question 10

Demand and supply side shocks

Answer 10

Demand reduces AD e.g interest rate cuts

Supply side shocks occur effecting AS

E.g natural disaster