2.2.5 Determinants of short-run aggregate supply 2016

What are the four factors of production?

Land, Labor, Capital, and Entrepreneurship.

What determines the short-run aggregate supply (SRAS)?

The price level and production costs.

What happens to short-run aggregate supply (SRAS) when production costs increase?

SRAS decreases, leading to a leftward shift of the SRAS curve.

Define 'aggregate' in the context of economics.

The total value of output of the economy at a given price level at a given point in time.

What is indicated by an upward sloping short-run aggregate supply curve?

As the price level increases, the quantity of goods and services supplied increases.

What is the difference between short-run and long-run in economics?

The short-run involves at least one fixed factor of production, while in the long-run all factors can vary.

What is the effect of an increase in wages on short-run aggregate supply?

If wages increase, firms may employ less labor or substitute labor with capital, leading to a decrease in SRAS.

How do raw material prices affect short-run aggregate supply?

Higher raw material prices increase production costs, leading to a leftward shift of the SRAS curve.

What will a rise in business tax rates do to short-run aggregate supply?

It will increase production costs and lead to a decrease in SRAS.

What occurs when the exchange rate strengthens?

Imported raw materials become cheaper, leading to an increase in SRAS.

How does productivity impact short-run aggregate supply?

Changes in productivity can affect output levels; higher productivity increases SRAS.

What does a shift from SRAS1 to SRAS2 indicate?

An increase in production costs, leading to a leftward shift of the SRAS curve.

What would cause a movement along the SRAS curve?

Changes in aggregate demand affecting the price level.

In terms of short-run aggregate supply, what is real wage?

Real wages are money wages adjusted for inflation.

What can lead to a rightward shift of the SRAS curve?

A decrease in production costs.

What reflects an increase in productive efficiency within an economy?

A rightward shift of the SRAS curve due to improved productivity.