2.3

• aggregate supply

  the total supply of goods and services available in an economy from producers
• supply side

  referring to the ability of producers to produce goods and services and hence outputs (GDP)
• factors influencing SRAS

  • changes in costs of raw materials and energy
  • changes in exchange rates
  • changes in tax rates
• factors influencing LRAS

  • technological advances
  • changes in relative productivity
  • changes in skills and education
  • changes in government regulations
  • demographic changes and migration
  • competition policy
• classical economists

  short run supply curve that existed before all markets and prices had adjusted

  long run supply curve that existed once markets and prices had adjusted

  believed all markets cleared - all factors of production will be used in the LR, markets will turn to equilibrium - didn't happen during the Great Depression
• keynesians

  labour market equilibrium needs real wages to fall

  wages are 'sticky' downwards - nominal wages won't fall

  even if nominal wages fall, prices are also faling so real wages may not fall