2.5/2.6 Aggregate Supply And Determinants Of Aggregate Supply Flashcards Preview

A Level Exonomics - Macro > 2.5/2.6 Aggregate Supply And Determinants Of Aggregate Supply > Flashcards

Flashcards in 2.5/2.6 Aggregate Supply And Determinants Of Aggregate Supply Deck (13)
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1
Q

Aggregate supply definition

A

The total quantity of output that all the firms in the economy are willing to produce at a given price level

2
Q

Short run aggregate supply definition

A

Aggregate supply when the level of capital is fixed

3
Q

Long run aggregate supply definition

A

Aggregate supply when the economy is producing at its production potential

4
Q

What causes SRAS to shift?

A

Any change in the costs of production

5
Q

What will cause LRAS to shift?

A

Changes in quantity, quality or productivity of factors of production

6
Q

Institutional structure definition

A

The financial and legal systems which make it easier for businesses to set up, operate and expand

7
Q

How does institutional structure affect aggregate supply?

A
  • if the financial sector is is effective in channelling funds from savers to borrowers this allows investment for businesses, increasing AS
  • increases in LRAS can be achieved if steps are taken to make it easier for businesses to start up, comply with laws ect.
8
Q

What shape is the classical LRAS curve?

A

Vertical

9
Q

What shape is the Keynesian AS curve?

A

Curved

10
Q

What are the three parts of the Keynesian AS curve?

A
  • low levels of GDP, easy to find workers without any upward pressures on wages, elastic
  • nearing maximum output of GDP harder to find workers and spare capacity without any increase in wages and prices, factors of production become scarce
  • inelastic as we reach full employment of factors of production, price level is high and GDP is fixed
11
Q

What effect on unemployment does real national output have?

A
  • increase in real national output leads to a greater demand for workers = reduce unemployment
  • decrease in real national output means less workers are need = high unemployment
12
Q

What are the five determinants of SRAS?

A
  • money wage rates
  • changes in the cost of raw material
  • business taxation
  • productivity
  • exchange rate changes
13
Q

Determinants of long-run aggregate supply?

A
  • technology
  • productivity
  • factor mobility
  • enterprise = setting up of more firms
  • economic incentives and attitudes