Factors that impact on AS

Question 1

What are the factors that impact on aggregate supply?

Answer 1

• Costs of production
• Technological change
• Productivity
• Exchange rates
• Climate conditions
• Quantity of resources
• Quality of resources

Question 2

What effect does technology have on aggregate supply?

Answer 2

Have replaced many jobs in particular low skilled/ repetitive tasks.
Eg-
-Robotics
-Driverless trucks

Question 3

What is the effect of exchange rates on aggregate supply?

Answer 3

The depreciation of the AUD makes it more expensive to purchase imports used in the production process.
This will increase costs of production= decreasing AS.
-Opposite would happen in AUD increased.

Question 4

What is the effect of climate conditions on aggregate supply?

Answer 4

An increase in severe weather conditions will reduce AS as the resources being produced will reduce therefore decreasing aggregate supply.
Eg- Cyclone Debbie- impacted bananas, cane sugar, mining, tourism.

Question 5

How is labor productivity measured?

Answer 5

GDP divided by total hours worked

Question 6

Define multi-factor productivity

Answer 6

Is a measurement that determines efficiently both capital and labour production levels.

Question 7

Define productivity growth

Answer 7

Producing more with the same amount of inputs (costs per unit decreases).

Question 8

What are the costs of production that effects aggregate supply?

Answer 8

• Wage growth- increases expenses which decreases profits and money to invest in more resources.
• Price of resources

Question 9

What is the effect of quality of resources on aggregate supply?

Answer 9

Depletion of resources will reduce the quality of aggregate supply as producer will have to search for quick alternatives.
-If labour resources can be improved through training this will increase AS.