aggregate supply mindmap

Question 1

Why is SRAS upward sloping

Answer 1

Because firms need a higher price in order to make temporarily increasing their output profitable

Question 2

what is the example of for sras upwards sloping

Answer 2

Overtime pay being higher than standard pay so prices need to be higher to make it worth it for firms

Question 3

What is sras shifted by

Answer 3

Changes to the cost of production

Question 4

What are examples of changes to production costs

Answer 4

Nominal wage rates
Raw material costs
Oil prices
Business taxes
Exchange rates
Productivity

Question 5

What is LRAS

Answer 5

productive potential of the economy
There is a finite amount that can be produced with given factors of production

Question 6

Is LRAS inelastic or elastic

Answer 6

It is perfectly in elastic so it is a vertical line

Question 7

What is lras shifted by

Answer 7

Changes to the quantity and quality of factors of production

Question 8

What are the examples of things that shift the LRAS curve

Answer 8

Land
Labour
Capital
Enterprise

Question 9

Examples for land for LRAS shifts

Answer 9

Discovering new resources
Introduction of new technology to grow crops all year round

Question 10

Examples for labour in LRAS shifts

Answer 10

Demographic changes as immigration and incentives can change the quantity of labour
Education, health and technology affect the quality of labour
Geographic and occupational mobility allow labour to be used most productively

Question 11

Examples for capital

Answer 11

Anything that affects investment spending by firm like interest rates or confidence
Anything that affects mobility of capital

Question 12

Enterprise examples

Answer 12

Anything to support risk bearing in businesses
Like support for new firms and a strong banking sector

Question 13

What is aggregate supply

Answer 13

Total output produced in an economy at a given price level over a period of time

Question 14

What are the factors that cause shifts of LRAS caused by

Answer 14

Institutional structure of the economy
Things like :
Banking systems that help provide capital
Legal systems that can protect property rights
Political systems that promote stability and discourage corruption

Question 15

What’s do Keynesian economists argue

Answer 15

Keynesian exonomjcsts argue that since the economy can get stuck at a point below productive capacity in the long term, the aggregate supply curve looms curved

Question 16

What happens at Keynesian low level of outputs

Answer 16

At low levels of output AS is perfectly elastic- straight horizontal
Because of spare capacity means we can increase output without increasing price levels

Question 17

What does the upwards sloping part of Keynesian AS curve mean

Answer 17

It is upward sloping since supply bottlenecks cause costs to increase, increasing price levels

Question 18

What happens when the Keynesian AS curve becomes a straight vertical line

Answer 18

It becomes perfectly in elastic as all resources are being used to their full potential so the output can’t increase even if there is a price rise