Aggregate supply

Question 1

What is the definition of AS

Answer 1

Aggregate supply is the total supply of goods/services produced within an economy at a specific price level at a given time

Question 2

Why is the SRAS curve upwards sloping

Answer 2

When firms want to increase their output in the short run, they don’t have time to hire new workers so they need to pay their current workers overtime pay, which will increase the firms costs forcing it to put its prices up

Question 3

What causes a shift in the SRAS curve

Answer 3

A change in cost of production

Question 4

What causes LRAS to shift

Answer 4

Changes in the productive capacity of the economy

Question 5

Why is the keynesian LSAS shaped the way it is

Answer 5

At the beginning when there are there is a large availability of factors of production, it is easy to increase output while as factors of production are used up it becomes harder to increase output until it becomes impossible to increase output.