4.2.5 Determinants of short-run aggregate supply

• What does short-run aggregate supply (SRAS) represent?

  Output and price relationship
• How does higher productivity affect SRAS?

  Increases SRAS
• Order the determinants of SRAS by their impact on its shift (left or right):

  1️⃣ Lower input prices

  2️⃣ Higher productivity

  3️⃣ Higher subsidies

  4️⃣ Higher expected future prices
• Higher expected future prices can increase current SRAS.


  True
• Match the SRAS determinant with its effect:

  Higher input prices ↔️ Lower SRAS

  Higher productivity ↔️ Higher SRAS
• If firms expect higher future prices, they may be willing to supply more in the current period, shifting SRAS to the right
• Higher input prices lead to lower SRAS.


  True
• What is the assumption underlying SRAS regarding factors of production?

  At least one is fixed
• Higher productivity shifts SRAS to the right.


  True
• An increase in input prices causes SRAS to shift to the left
• What happens to SRAS when firms produce more with the same inputs?

  SRAS shifts right
• When firms expect higher future prices, they increase current supply.

  False
• Higher input prices lead to a lower SRAS
• Higher taxes result in a lower SRAS
• Lower input prices increase SRAS.


  True
• Steps in the process of SRAS changes due to productivity increases

  1️⃣ Productivity increases

  2️⃣ Production costs decrease

  3️⃣ Firms supply more at each price level

  4️⃣ SRAS curve shifts right
• Technological advancements improve productivity, which increases SRAS.


  True
• SRAS assumes that at least one factor of production is fixed
• Higher taxes decrease SRAS, while higher subsidies increase SRAS.


  True
• Why do higher input prices lower SRAS?

  Higher production costs
• Higher taxes raise production costs
• What happens to SRAS if productivity increases?

  Shifts to the right
• What is the effect of lower input prices on SRAS?

  Higher SRAS
• What does SRAS stand for?

  Short-run aggregate supply
• Match the SRAS determinant with its effect:

  Prices of inputs ↔️ Higher input prices ⇒ lower SRAS

  Productivity ↔️ Higher productivity ⇒ higher SRAS

  Taxes and subsidies ↔️ Higher taxes ⇒ lower SRAS

  Expectations ↔️ Higher expected future prices ⇒ higher SRAS
• What effect do higher subsidies have on SRAS?

  Shift SRAS right
• Order the steps in the process when input prices increase:

  1️⃣ Input prices rise

  2️⃣ Production costs increase

  3️⃣ Firms supply less at each price level

  4️⃣ SRAS shifts left
• Technological advancements increase SRAS by enhancing productivity
• What does short-run aggregate supply (SRAS) represent?

  Quantity of real output vs. price level
• How does higher productivity affect SRAS?

  Increases SRAS
• What happens to SRAS if firms expect higher future prices?

  Increases SRAS
• How does productivity influence SRAS?

  Increases efficiency
• What is the primary impact of technological advancements on SRAS?

  Shifts SRAS to the right
• Supplier expectations about future prices influence SRAS
• Environmental standards can decrease SRAS by increasing production costs.

  True
• What happens to SRAS if firms expect lower future prices?

  Increases SRAS