aggregate supply Flashcards

(33 cards)

1
Q

what is aggregate supply

A

the total planned output of goods and services that firms in an economy are willing and able to supply(produce) at a given price level.

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2
Q

what is in the long run

A

there is a limit to how much output can be produced

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3
Q

what are the four main points of a long run AD curve

A
  • cannot exceed capacity for a long time
  • capacity doesn’t depend on cost/price
  • AS is perfectly inelastic as it is independent of price
  • vertical LRAS curve
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4
Q

what does LRAS stand for

A

long run aggregate supply

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5
Q

what is full employment

A

the level of output where all available factors of production are engaged in the production process (Y FE)

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6
Q

what does full employment represent

A

it represents maximum capacity

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7
Q

what are inactive resources

A

when they aren’t involved in the production process (capable but not willing)

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8
Q

where on a PPF is it full employment

A

any point on the PPF

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9
Q

what will cause a long run aggregate supply shift

A

if there is a change in the productive potential of an economy due to a change in the quality and/or quantity of a factor of production.

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10
Q

what causes a long run aggregate supply curve to shift left

A

a decrease in the quantity and/or quality of a factor of production

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11
Q

what causes a long run aggregate supply curve to shift right

A

an increase in the quantity and/or quality of a factor of production

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12
Q

what are the three quantities of land

A
  • discover new resources
  • land reclamation
  • extend boundaries
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13
Q

what are the two qualities of land

A
  • irrigation
  • flood defences
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14
Q

what are the three quantities of labour

A
  • birth rates
  • higher retirement age
  • immigration/emigration
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15
Q

what are the two qualities of labour

A
  • education
  • training
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16
Q

what is the quantity of capital

A
  • increased investment
17
Q

what is the quality of capital

A
  • technology advances
18
Q

what is the quantity of enterprise

19
Q

what is the quality of enterprise

A
  • training and support
20
Q

what causes shifts in the long run

A

the quality and quantity of factors of production

21
Q

what causes shifts in the short run

22
Q

what is the short run

A

a period of time when one of the factors of production is fixed and the others are variable

23
Q

what is the short run aggregate supply

A

a curve that shows the relationship between the average price level and the quantity of output firms wish to produce in the short run

24
Q

what type of relationship is there between the price level of goods and quantity of goods and services produced (SRAS)

A

a direct relationship e.g. if the price level increases so does the income and vice versa for a decrease

25
what causes movements on the SRAS curve
changes in price
26
what does a rise in prices cause
a movement up and to the right
27
what does a fall in prices cause
a movement down and to the left
28
what are the 5 causes of shifts in SRAS curves
- changes in wage rate - changes in resource costs - government regulation - business taxes - exchange rates
29
how do changes in wage rate affect the SRAS
they increase the SRAS when wages fall - they decrease SRAS when wages rise
30
how do changes in resource cost affect the SRAS
a rise in prices causes a decrease in SRAS - a fall in prices causes an increase in SRAS
31
how does government regulation affect the SRAS
increased regulation means higher costs so SRAS decreases - decreased regulation means lower costs so SRAS increases
32
how do business taxes affect the SRAS
decreased taxes causes SRAS to increase - increased taxes causes SRAS to decrease
33
how do exchange rate affect the SRAS
rising means imports are cheaper so SRAS increases - falling means imported resources are more expensive so SRAS decreases