4.3.6 Determinants of short-run aggregate supply

• What does understanding SRAS help evaluate?

  Economic response to changes
• Higher productivity levels shift the SRAS curve to the left.

  False
• Order the factors influencing SRAS from most to least controllable by firms.

  1️⃣ Productivity

  2️⃣ Cost of Inputs

  3️⃣ Taxation Policies

  4️⃣ Government Regulations
• How do lower raw material costs affect SRAS?

  Increase, shifts right
• Stricter government regulations can increase compliance costs and decrease SRAS.


  True
• The cost of raw materials is another key determinant of short-run aggregate supply
• How does SRAS differ from LRAS in terms of price level sensitivity?

  SRAS is sensitive
• Lower raw material prices reduce production costs, boosting SRAS and shifting the curve to the right
• How does SRAS differ from LRAS in terms of price level sensitivity?

  SRAS is responsive
• Understanding SRAS is crucial for analyzing economic fluctuations and policy effectiveness.


  True
• Stricter government regulations decrease SRAS and shift the curve to the left
• Higher wages increase production costs, leading to a leftward shift of the SRAS curve.


  True
• When raw material prices rise, it increases the overall cost of production, decreasing SRAS and shifting the curve to the left
• Increased productivity reduces per-unit production costs, leading to a rightward shift of the SRAS curve.


  True
• What is the effect of government subsidies on SRAS?

  Increases SRAS and shifts right
• What does short-run aggregate supply (SRAS) represent?

  Total quantity firms supply
• SRAS is responsive to price level changes due to sticky wages and input prices.


  True
• Match the supply concept with its characteristic:

  SRAS ↔️ Responsive to price level

  LRAS ↔️ Fixed in the short term
• Higher input costs cause SRAS to shift to the left.
• How do stricter government regulations affect SRAS?

  Decrease SRAS
• What is the primary cost of input for firms that affects SRAS?

  Wages
• Lower wages encourage firms to increase supply.
• Lower raw material prices encourage firms to increase supply.
• Higher productivity reduces per-unit production costs and increases SRAS.


  True
• How do higher taxes affect SRAS?

  Decrease SRAS
• Lower taxes decrease production costs and boost SRAS.
• When domestic currency depreciates, the cost of imported inputs increases.
• Short-run aggregate supply (SRAS) refers to the total quantity of goods and services that firms are willing to supply at a given price
• Wages represent the labor costs firms must pay, which are a key component of the cost of inputs
• What impact do higher taxes have on SRAS?

  Decrease, shifts left
• SRAS is defined as the total quantity of goods and services firms supply at a given price level over a short period
• Wages are labor costs firms must pay, which are a key component of the cost of inputs
• What happens to SRAS when wages increase?

  Decreases, shifts left
• What is the effect of higher raw material prices on SRAS?

  Decreases, shifts left
• What happens to the SRAS curve when raw material prices increase?

  Shifts to the left
• Understanding how raw material prices affect SRAS is crucial for evaluating the economy's short-term response to changes in input costs.

  True
• LRAS represents the total quantity of goods and services the economy can supply when all factors of production are fully employed
• What happens to SRAS when the cost of wages increases?

  Decreases and shifts left
• Arrange the following wage level impacts on SRAS in the correct order:

  1️⃣ Higher wages increase production costs

  2️⃣ Higher production costs decrease SRAS

  3️⃣ SRAS curve shifts to the left
• What are raw materials in the context of SRAS determinants?

  Physical inputs in production