Short Run Aggregate Supply 2.3.2

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6 Terms

1
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What is Short Run Aggregate Supply (SRAS)?

The relationship between planned national output (GDP and the general price level).

2
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What assumption is made when drawing the SRAS curve?

We hold the state of technology and production costs constant

3
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When will the SRAS curve shift?

When there is a change in the supply costs of firms throughout the economy.

4
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What is the effect on the SRAS curve when a firms costs increase?

Causes an inward shift. Less can be produced at each general price level.

5
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What is the effect on the SRAS curve when a firms costs decrease?

Causes an outward shift. More can be produced at each general price level.

6
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What are some factors causing shifts in short run aggregate supply?

  • Unit wage costs e.g. minimum wage

  • Labour productivity

  • Key raw materials and component prices, and energy prices

  • Business indirect taxes, subsidies, VAT

  • Cost of imported material (affected by exchange rate and global prices)

  • Supply shocks e,g, hurricane, drought, political crisis