E2.3 - aggregate supply - Flashcards in A Level and IB Economics

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Created on: 11-05-19 17:54

AGGREGATE SUPPLY DEFINITION

the total value of goods and services produced in an economy in 1 financial year at various price levels. largely influenced by productivity, influenced by factors such as COP, investment, availability and efficiency of FOP, SSPs

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PRODUCTIVITY DEFINITION

the output per worker

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SHORT RUN AGGREGATE SUPPLY

when at least 1 FOP is fixed. upward sloping constant gradient.

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FACTORS INFLUENCING SRAS

any change to the general cop. COST OF RAW MATERIALS-oil especially. EXCHANGE RATES- businesses need imports, strong/weak currency increases or decreases COP and SRAS. TAX RATES. ANY FACTOR INFLUENCING INVESTMENT-interest, tax, govt spending, FOP

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LRAS

all fop are variable. in the long run, there will be a limit on how much supply can increase

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KEYNESIAN LRAS

curved shape. SPARE CAPACITY- can increase output without any inflation/fop pressures. govt intervention needed to shift AD, expansionary demand side policies. BOTTLENECK- pressure on existing fop-pl increases. FULL EMPLOYMENT- ad,pl, no change in ro

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CLASSICAL LRAS

believes the economy is always at full employment/ all FOP are fully used. increases in AD only increase PL, not RO. if unemployment does exist-result of short term failure of the market/misallocation by the government.

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FACTORS AFFECTING LRAS

CHANGES IN RELATIVE PRODUCTIVITY- efficiency, skill, tech-investment- further increase. DEMOGRAPHIC CHANGES. EDUCATION+SKILLS- efficiency+productivity, CHANGES IN GOVT REGULATION-subsidy-r+d. TECHNOLOGICAL ADVANCEMENT-efficiency, productive capacity

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Other cards in this set

Card 2

Front

PRODUCTIVITY DEFINITION

Back

the output per worker

Card 3

Front

SHORT RUN AGGREGATE SUPPLY

Back

Card 4

Front

FACTORS INFLUENCING SRAS

Back

Card 5

Front

LRAS

Back

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E2.3 - aggregate supply