Aggregate Supply

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6 Terms

1
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Aggregate Supply

the total amount of goods and services that all industries in the economy produce at every given price level.

2
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What will shift the SRAS curve

a change in any of the factors other than the price level (supply-side shocks)

3
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Factors that cause changes in the cost of production

  1. Change in wage rates

  2. Change in the cost of raw material

  3. Change in the price of imports

  4. Change in government indirect taxes or subsidies

4
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New classical LRAS

  • perfectly inelastic at the full employment level of output

  • full employment level of output - the potential output that could be produced if the economy where operating at full capacity

  • Independent of the price level so if prices rise or fall, the level of output will not change

5
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Explain the 3 phases of the Keynesian AS

  • Phase 1

  • Phase 2

  • Phase 3

6
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What will shift the AS and LRAS curves

If their is an improvement in the quality of the FOP’s or an increase in the quantity of the FOP’s.