Topic 8- Aggregate Supply

Question 1

Factors that shift AS

• minimum wage
• tax and benefits system

Answer 1

• increase in minimum wage can decrease AS as costs for firms increase however could also increase AS as productivity increase
• A cut in taxes on firms might increase AS e.g. corporation tax and a cut in benefits Will make people want to keep their jobs> productivity increases

Question 2

Factors which shift AS

• raw materials
• exchange rates
• technological advances
• workforce size
• skills

Answer 2

• costs of raw materials if the cost of oil rises>cost of production will rise>AS decreases
• change in exchange rates the pound gets stronger imports become cheaper&AS increases
• technological advances can reduce costs for firms
• increase in the size of the workforce E.g. increase in migration
• increase in skills e.g. more people well educated

Question 3

Aggregate supply

Answer 3

The output of all sorts of goods and services that are produced within an economy