Theme 2:2.3 AS

Question 1

what is AS?

Answer 1

the amount that firms are willing and able to produce at a given price level in a given time . It is largely influenced by productivity.

Question 2

what is a movement up the AS curve called?

Answer 2

an extension

Question 3

what is a movement down the AS curve called?

Answer 3

a contraction

Question 4

what factors shift the SRAS curve?

Answer 4

ANY CHANGE TO COST OF PRODUCTION:
-wage rates
-exchange rates
-tax
-technology advances
-cost of raw materials

Question 5

what is the difference SRAS and LRAS?

Answer 5

SRAS-refers to fixed FOP
LRAS-there is changing quality/quantity of FOP

Question 6

what are the two shapes of a LRAS curve?

Answer 6

classical(straight line) and Keynesian(curved)

Question 7

what do classical economists assume about LRAS?

Answer 7

that firms operate at full capacity

Question 8

what do Keynesian economists assume about LRAS?

Answer 8

that there is spare capacity and as resources get employed, they have become scarce and the price goes up

Question 9

what are the factors that shift the LRAS curve?

Answer 9

CHANGING QUANTITY AND QUALITY OF FOP:
-technological advances-allows efficient production and increases total output
-infrastructure
-new-inward migration-increases labour supply
-education
-new resources discovered

Question 10

what is spare capacity?

Answer 10

FOP that are unused

Question 11

what is a supply side shock?

Answer 11

any significant changes to the factors that shift AS.