Determinants of SRAS

• What factors influence the short-run aggregate supply (SRAS)?

  Changes in the conditions of supply

  
• What are the main determinants of the SRAS curve?

  The price level and production costs
• How does an increase in employment costs affect the SRAS curve?

  It shifts the supply inwards from SRAS1 to SRAS3

  
• What are some examples of employment costs that can change?

  Wages, taxes, and labour productivity
• How do changes in the cost of other inputs affect the SRAS curve?

  They can shift the AS curve outwards or inwards
• What happens to the AS curve when the currency strengthens?

  It shifts outwards from SRAS1 to SRAS2
• What is meant by 'red tape' in the context of government regulation?

  It refers to business regulation that can complicate processes
• What is the impact of net outward migration of workers on the domestic economy?

  It causes a 'brain drain' as skilled workers move elsewhere
• What effect does a fall in business capital spending have on supply?

  It causes supply to fall
• What are the key factors that can shift the SRAS curve?

  • Changes in the conditions of supply
  • Price level changes
  • Production cost changes
  • Employment costs (wages, taxes, productivity)
  • Costs of other inputs (raw materials, commodity prices, exchange rates)
  • Government regulation (environmental laws, business regulation)
  • Migration of skilled workers
  • Business capital spending