2.3 Flashcards
(3 cards)
1
Q
What is AS and what is SR and LR
A
- Increases in cost of raw materials and energy- SRAS shifts left as it costs more to produce the same amount of goods
- Changes in exchange rates- weak pound = increased cost of imports = increased COP = shift SRAS left
- Changes in tax rate= increases COP = shifts left/ subsidies right as they decrease costs
Supply side shocks occur when these factors change singificaantly
2
Q
Factors influencing SRAS
A
- Increases in cost of raw materials and energy- SRAS shifts left as it costs more to produce the same amount of goods
- Changes in exchange rates- weak pound = increased cost of imports = increased COP = shift SRAS left
- Changes in tax rate= increases COP = shifts left/ subsidies right as they decrease costs
Supply side shocks occur when these factors change singificaantly
3
Q
Factors that influence LRAS
A
- Technological advancement= speeds up production process= more goods produced with same amount of resources= LRAS shifts right
- Changes in productivity= more produced with given amount of resources = shift LRAS right, depends on efficiency,technology and skill of labour
- Changes in education= skilled workforce= more employable and quicker and more efficient= increased output per worker= LRAS shift right= improves occupational mobility and decreases structural unemployment as ppl are able to switch to new jobs
- Change in gov regulation, encourage ppl to work= increases size of workforce eg change working age/retirement age, reduce benefits= ppl find job, stay at home mums entitled with free child care
- Tax breaks to firms investing in tech= increased output
- Decreased barriers to entrepreneurship= more companies= more output
- Demographic changes and migration= increased population = increased size of workforce = can produce more,
>EVAL- depends on skills of migrants and age , if aren’t working age less produced - Competition policy- promote comp= force to improve quality or lower prices= forces firms to increase efficiency= more goods procured = LRAS shifts right
- EVAL- less comp= encourages investment and innovation as firms do not face opportunity cost of where to spend
