2.5 Determinants of short-run and long-run aggregate supply

needs keynesian LRAS

Main determinants of SRAS

price level and production costs

changes in production costs

money wage rates

raw material prices

business taxation

productivity

determinants of LRAS

technology, productivity, attitudes, enterprise, factor mobility, economic incentives

normal capacity level of output

the maximum output an economy can produce in the long run

the position of the vertical LRAS represents

they normal capacity level of output/full capacity/potential output/full employment

What is the institutional structure of the economy?

the financial and legal systems which make it easier for businesses to set up, operate and expand

how does the institutional structure of an economy impact AS

how effective the financial sector is in channeling funds from savers to borrowers (so easier funds for investment)

how much regulation in the legal sytem for expanding opperations eg building factoreis ect