Aggregate supply (MAC) Flashcards
What is aggregate supply?
It is the total amount of goods and services that all firms in the economy are willing to supply at a given price level in an economy in a year.
What is the SRAS?
It is based on the costs of production and incorporates rent wages interests and profits.
What causes a movement in the AS curve?
Changes in price level caused by factors which are not related to AS
What are shifts in the AS curve caused by?
Changes in the cost of production
What is spare capacity?
It is where there are unemployed resources in the economy
What is the classical approach?
Assumes that the economy is self adjusting and free of any government intervention
What is the Keynesian approach?
The economy may be in equilibrium with unemployment and governments may need to stimulate AD to achieve long term growth and employment
What factors influence SRAS?
Change in the cost of raw materials
Change in exchange rates
Changes in tax rates
Change in the level of tariffs
What factors influence LRAS?
Technological advances
Relative productivity changes
Education and skills changes
Changes in government regulations
Demographic changes and migration
Competition policy
Changes in the minimum wage
