Theme 2 : Aggregate Supply

Question 1

Short run and long run AS

Answer 1

-one factor of production fixed short run
-long run AS shows potential supply in the long run cost and productivity factors change

Question 2

Difference between keynsian and classical long run

Answer 2

Keynesian
-price level is fixed until resources are not fully employed
-once full employment increasing output is inflationary
Classical
-output is fixed at each level factors of employment are fully employed

Question 3

Factors influencing the long run AS

Answer 3

-technological advances
-changes in relative productivity
-changes in education and skills
-changes goverment regulation
-demographic changes and migration
-competition policy