Topic 4 - Aggregate supply

Question 1

Aggregate Supply

Answer 1

The total output of an economy over a given period of time

Question 2

Short run aggregate supply curve

Answer 2

Shows how much output firms would be prepared to supply in the short run at any given average price level

Question 3

Short run

Answer 3

Short run is the time period where we assume at least either land or capital are fixed factors of production

Question 4

Monetarist school

Answer 4

A group of economists who believed that the macroeconomy already adjusts rapidly to the full employment level of output, and that monetary policy should be the prime instrument for stabilising the economy.

Question 5

Natural rate of output

Answer 5

The long run equilibrium level of output

Question 6

Natural rate of unemployment

Answer 6

The rate of unemployment that exists when the economy is in long run equilibrium.

Question 7

Keynesian school

Answer 7

A group of economists who believed that the macroeconomy could settle at an equilibrium that was below full employment.

Question 8

What are the 3 points on a Keynesian LRAS curve

Answer 8

1- unused capacity
2- intermediate range
3- full capacity