C27 Aggregate Supply Flashcards
1
Q
What is AS?
A
The total output produced in an economy at a given price level in a given time
2
Q
What causes a shift in SRAS?
A
When there is a change in the cost of production
Changes in expenses (wages, taxes etc)
3
Q
What causes a shift in LRAS?
A
+ or - Q^2 CELL (factors of production)
4
Q
What role do banks play?
A
Firms borrow money from banks to invest so, strong banks —> more investment —-> more efficiency —–> more production
5
Q
What is the accelerator effect?
A
IF demand increase, firms invest early as they have to predict the future profit.
6
Q
Why is the LRAS flat?
A
As it represent the economy at maximum efficiency
7
Q
What else shifts LRAS?
A
Education
Migration
Healthcare
Regulation
Competition
