AS

Created by

Charlie Houlston

Cards (15)

define aggregate supply 
total amount of supply in the economy as a whole
why does the SRAS curve slope upwards
as prices rise the profit incentive increases so firms are more willing to supply
why does the SRAS curve slope upwards
as prices rise the profit incentive increases so firms are more willing to supply
how can commodities affect SRAS
an increase in commodity price causes SRAS to fall as the profit incentive falls
how can wage rates affect SRAS
falls in wages is a fall in costs so SRAS increases
how does productivity affect SRAS 
increases in productivity means labour costs fall increasing the profit incentive and therefore increasing SRAS
how does VAT effect SRAS
a larger portion of profit go to the government reducing the profit incentive at every price level so SRAS falls
what does the LRAS curve represent
the total amount of output an economy can produce in the long run given the amount of resources
why are a PPD and LRAS curve similar  
the factors that cause shifts in one cause shifts in the other
how does increased investment increase LRAS
additional capital good mean increased production is capable
what changes to the workforce can increase LRAS
-increased size
-increased education/training - allows for increased production
how can infrastructure affect LRAS
better infrastructure means resources can move easier reducing cost and allowing more output
what can cause a fall in LRAS
-war/ natural disaster reduces output
-investment failing so low capital goods are worn out so output decreases
-a fall in the size of working population
what is the keynesian AS curve 
it combines the SRAS and LRAS curves
what happens to price levels as output changes on a Keynesian AS curve
-low output leads to little increases in price level due to spare capacity
-at medium output both output and price changes
-at the LRAS point output cannot change and only price level can caneg
the curve can shift left or right best on resource availability