Short - run aggregate supply (2)

What are the multiple factors that can influence the short run aggregate supply (SRAS) ?

• Changes in costs of raw materials and energy

• Changes in exchange rates (E/R)

• Changes in tax rates

A Table That Explains the Influences on Short-Run Aggregate Supply (SRAS)

A Table That Explains the Influences on Short-Run Aggregate Supply (SRAS)

Change in Condition	Explanation	Impact on SRAS
Increase in costs of raw materials/energy	As the price of input costs rise, fewer goods/services can be produced with the same amount of money	SRAS decreases - shifts left
Decrease in costs of raw materials/energy	As the price of input costs decrease, more goods/services can be produced with the same amount of money	SRAS increases - shifts right
Appreciation of E/R	Producers often import raw materials Stronger currency = cheaper imports Cheaper imports = decrease in input costs Lower costs = more output	SRAS increases - shifts right
Depreciation of E/R	Producers often import raw materials Weaker currency = more expensive imports More expensive imports = increase in input costs Higher costs = less output	SRAS decreases - shifts left
Decrease in tax rates	Taxes represent an additional cost for firms Decreasing taxes =  decrease in costs Lower costs = more output	SRAS increases - shifts right
Increase in tax rates	Taxes represent an additional cost for firms Increasing taxes =  increase in costs Higher costs = less output	SRAS decreases - shifts left

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