MAC - Topic 4 - Aggregate Supply

Question 1

What are the two economic models of AS?

Answer 1

Keynesian and Classic Models

Question 2

What makes the SRAS curve shift?

Answer 2

Changes in the cost of production, also known as Supply Side Shocks.

Question 3

What are the five Supply Side Shocks to SRAS?

Answer 3

Wages, Raw Materials, Oil Prices (Cost of transporting goods and running machines), Business Taxes (VAT) and Import Prices

Question 4

What does WROBI stand for?

Answer 4

Wages, Raw Materials, Oil Prices, Business Taxes, Import Prices

Question 5

What does YFE represent?

Answer 5

The full employment level of output at a sustainable level.

Question 6

What is the position of the LRAS based on?

Answer 6

Q²CELL

Question 7

What does Q²CELL stand for?

Answer 7

Quality and Quantity of Capital, Entrepreneurship, Land and Labour

Question 8

What are examples of Q²CELL that will affect the LRAS

Answer 8

Labour Productivity, Investment, Infrastructure, Quantity of Labour, Competition between firms and New Resource Discoveries.

Question 9

What do Keynesians believe about the LRAS curve?

Answer 9

It is bendy instead of straight. There is no SRAS curve in the Keynesian model. There is more than one long run level of output. This is because using excess FOP is easy but gets gradually harder as you reach full employment.

Question 10

What does WPIDEC stand for?

Answer 10

Weak Pound, Imports Dear, Exports Cheap

Question 11

What does SPICED stand for?

Answer 11

Strong Pound, Imports Cheap, Exports Dear