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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.
