T2.3 - Econ

Question 1

What is aggregate supply?

Answer 1

AS is the quantity of goods and services that producers in an economy are willing and able to supply at a given level of prices in a given time period

Question 2

What is Short Run Aggregate of Supply?

Answer 2

SRAS is the relationship between planned national output (GDP) and the general price level

Question 3

What is Long run aggregate of supply?

Answer 3

LRAS represents the maximum possible output in an economy; it is economy are fully and efficiently employed

Question 4

Causes of shifts in SRAS

Answer 4

1. Changes in resource (input) prices
2. Business taxes, subsidies, regulations & imported costs
3. Unexpected supply shocks that affect the price of raw materials

Question 5

External factos affecting AS

Answer 5

1. World oil and gas prices
2. Energy prices/costs
3. Foodstuff prices

Question 6

Changes in a nation’s potential GDP (i.e LRAS) are brought by:

Answer 6

1. Changes in labour supply (i.e more people joining the labour force)
2. Changes in the stock of capital inputs - affected by the level of gross capital investment
3. Changes in the efficiency of inputs e.g. shifting resources from rural to urban areas

Question 7

Define productivity

Answer 7

Productivity is amount of output produced per hour worked