2.3 aggregate supply

Question 1

aggregate supply

Answer 1

the total quantity of goods and services that producers in an economy are willing and able to supply at a given price point in a given time

Question 2

short run aggregate supply

Answer 2

the relationship between the total planned output and the general price level assuming that the prices of factors of production are fixed e.g wages and raw materials

Question 3

movement along the SRAS curve

Answer 3

occurs when there is a change in the price level leading to an expansion(if prices rise) or contraction (if they fall)in output

Question 4

shift in the SRAS curve

Answer 4

caused by changes in the costs of production such as wages raw material prices, taxes subsidies and exchange rates

Question 5

factors influencing SRAS (wage costs)

Answer 5

wage costs- an increase in wages raises production costs shifting the SRAS to the left a decrease shifts it to the right

Question 6

factors influencing SRAS (raw material and energy prices)

Answer 6

higher prices increase production costs shifting SRAS left lower production costs shift right

Question 7

factors influencing SRAS (exchange rates)

Answer 7

a depreciation makes imports more expensive shifting the SRAS to the left appreciation has the opposite impact

Question 8

factors influencing SRAS (taxation)

Answer 8

higher indirect taxes increase costs shifting SRAS to the left subsidies reduce costs shifting SRAS right

Question 9

factors influencing SRAS (supply shocks)

Answer 9

unexpected events such as a pandemic or natural disasters can suddenly change production costs shifting the SRAS

Question 10

long run aggregate supply

Answer 10

represents the maximum potential output of an economy when all factors of production are fully employed

Question 11

factors influencing LRAS

Answer 11

quantity and quality of factors of production
education and training
technological advancements
infrastructure development- enhances efficiency
government policies such as investment