Macro - Short-run AS

Question 1

Change in raw materials & energy costs affect on short-run AS

Answer 1

An increase in the costs of raw materials and energy will increase the costs of production for firms within the economy. This means SRAS will shift left as firms will produce less.

Question 2

Change in exchange rates affect on short-run AS

Answer 2

A weaker exchange rate will result in an increase in the price of Imports. This will increase the costs of production for all firms within the economy as they have to pay a higher price for any goods/services that they import. This will cause SRAS to shift less.

Question 3

Tax rates affect on short-run AS

Answer 3

The main type of taxation that affects SRAS is corporation tax, as this leads to an increase in the costs of production for firms within the economy. Low tax leads to increasing short and long run.