Agragate Suply 2.3

2.3 LRAS, SRAS

what is Long run AS

Assuemed the economy will move towards equilibrium where reacources are used to full capacity

• The maximum possible output an economy can produce

What are the charecteristics of LRAS

• All factors of production are variable and can change overtime

• An increace in price level wont cause an increace in output

What does the classical LRAS support

• The idea markets will always function at the maximum capacity in the long run

There are no movements along

what causes shifts of LRAS

• Changes in factors of production

What are the factors of production for LRAS

Q2CELL

• The quantity and quality of…

Enterprise

land

labor

capital

what is SRAS

Short run AS demonstrates how the increace in price leval will result in the increace in the ammount firms are willing to produce

What are the charecteristics for SRAS

• Ceterus paribus (except for labor)

• Shifts are caused by changes in cost of production

what factors influence SRAS

• Changes in interest rates

• Changes un wages

• Changes in the cost of raw materials and energy

• Exchange rates

What is AS

Agragate suply - The total value of output of the economy at a given price leval at a given point in time

What causes movements along the AS curve

• Changes in AD

• Changes in Price levels

what does the kensian model of LRAS support

• Belives that an economy could be in equilibrium bellow unemployment

Examples that can cause shifts in LRAS

• Goverment regulations and policy

• education and skills

• change in productivity