Short - Run Aggregate Supply

Question 1

What is aggregate supply?

Answer 1

The level of real national output that firms are willing to produce at different price levels

Question 2

What is a short run?

Answer 2

The period of time over which the price of factors of production are fixed, and the level of capital are fixed

Question 3

What does the classical school believe about markets?

Answer 3

That free markets without government intervention will lead to full employment in the long run

Question 4

What does the kenysian school believe about markets?

Answer 4

That there is no guarantee that an economy will be at full employment and therefore the government has a more active role role to play.

Question 5

What school of economic thinking has a distinction between Long and Short run?

Answer 5

Classical School

Question 6

To draw the SRAS curve what must we assume?

Answer 6

Firms seek to maximise profits
In SR, the cost of producing extra units of output increases as firms produce more output

Question 7

What does the SRAS curve show?

Answer 7

The levels of real national output firms are willing and able to produce at a given price level

Question 8

What are the determenints of SRAS? Factors of a shift

Answer 8

Money wage rates
Business taxation
Productivity
Raw materials prices
Interest Rates