2.3.2 Short-run AS

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6 Terms

1
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what are the factors influencing short run aggregate supply?

  • changes in costs of raw materials and energy

  • changes in exchange rates (E/R)

  • changes in tax rates

2
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what is the impact on SRAS if there’s an increase in costs of raw materials/energy?

  • increase in costs of raw materials increase the overall costs of production.

  • shifting SRAS to the left

3
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what is the impact on SRAS If there’s a decrease in costs of raw materials/energy?

  • a significant discovery of natural resources, lowers energy costs.

  • therefore, firms can produce more at lower costs, shifting SRAS to the right.

4
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what is the impact of an appreciation of E/R on SRAS?

  • a stronger domestic currency makes imports cheaper, reducing production costs.

  • as a result SRAS shifts to the right.

5
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what is the impact of depreciation of E/R on SRAS?

  • a weaker domestic currency makes imports more expensive.

  • therefore SRAS shifts to the left.

6
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what is the impact of a change in tax rates on SRAS?

  • higher tax rates increase costs, which reduces supply.

  • lower tax rates decrease costs, which increases supply.