Macroeconomics

Question 1

short-run

Answer 1

Refers to the period of time in which the price level can change but the cost of factors of production are held constant

Question 2

determinants of aggregate supply

Answer 2

wages, raw materials, indirect taxation

Question 3

determinants of aggregate demand

Answer 3

consumer expenditure, government expenditure, investment, exports, imports

Question 4

SRAS change in AD

Answer 4

Question 5

SRAS change in SRAS

Answer 5

Question 6

Monetarist/neo-classical LRAS

Answer 6

The LRAS curve shows a full level of employment. This is the level in the economy which all resources available in an economy are being fully utilised. The level of unemployment associated with full employment is called the natural rate of unemployment.

Question 7

Deflationary Gap

Answer 7

Question 8

Inflationary Gap

Answer 8

Question 9

Reasons for change in LRAS

Answer 9

1. changed workforce due to immigration
2. skill level of workforce due to education and training
3. change to capital stock through new investment
4. improvements in production technology
5. availability of new natural resources

Question 10

Shift in LRAS

Answer 10

LRAS will shift if there is a change in potential output in an economy, leading to a shift in Real GDP and an inverse shift in Price Level