section 2 (as)

Question 1

aggregate supply

Answer 1

the level of real national output that firms are prepared to supply at different price levels

Question 2

difference between sras and lras

Answer 2

in sras, the labour supply is limited which limits the amount that can be produced

in lras every factor if production is infinite

Question 3

short run aggregate supply

Answer 3

when at least one factor of production is fixed (usually capital or labour)

Question 4

long run aggregate supply

Answer 4

all factors of production can be varied

reflects the normal productive capacity of the economy (maximum sustainable level the economy can produce at)

equivalent to full employment, and all factors of production being fully and effiently used (same as ppf)

Question 5

what causes the sras to shift

Answer 5

changes in cost of productive shift the sras due to change in incentive to supply depending on price level

Question 6

typical costs of production examples

Answer 6

raw materials
commodities
labour costs (wages)
energy prices (oil)
interest rates
subsidies
indirect taxes
business rates
productivity

Question 8

supply side shocks

Answer 8

unexpected events which impact the supply side of the economy (in short run usually means unexpected change in costs of production

Question 9

supply side shock examples

Answer 9

covid 19
ukranian war

Question 10

determinants of long-run aggregate supply

Answer 10

quantity of factors of production
quality of factors of production
mobility of factors of production
technology
investment (on physical and human capital)
productivity
institutional structure of the economy
economic incentives

Question 11

how do quality and quantity of factors of production impact lras with examples

Answer 11

quantity up - production up - lras up
(e.g. increased immigration)

quality up - productivity up - lras up
(e.g. better education and training)

Question 12

factor mobility

Answer 12

the ease with which factors of production can be used for other purposes

in labour:
occupational mobility (match of jobs and skills)
geographic mobility (match of where people and jobs are)

Question 13

economic incentives that can impact lras

Answer 13

increase lras by incentivising people to work:
lowering welfare benefits
reducing income tax
increasing the minimum wage

increase lras by incentivising firms to be productive:
lowering coorperation tax
subsidies
support enterprise