Macro - The Characteristics Of AS

Question 1

Aggregate supply curve diagram

Answer 1

The total supply of goods/services produced within an economy at a given price level at a given time.

Question 2

What is the difference between a movement along / a shift of the AS curve

Answer 2

Shifts in aggregate supply are caused by changes in the condition of the supply in the economy (Changes in the costs of production for firms)

Movements in Aggregate Supply are caused by shifts in AD. As AD shifts, a movement along the AS supply curve is needed so that state equilibrium is achieved

Question 3

What is short run aggregate supply? (SRAS)

Answer 3

Short run AS shows the effects of changes in the costs of production on the economy in the short run

Question 4

What is long run aggregate supply (LRAS)?

Answer 4

Long run AS deals with the long term impact on the productive capacity of the economy (increase in quantity or quality would cause LRAS to increase). For example increase in Government spending on education would increase LRAS