MACROECONOMICS - AS

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what shifts sras and what shifts lras ?
Shift in SRAS is cause by a change in costs
shift in LRAS is caused by a change in quantity / qualtiy (productivity )
1 of 18
what does an increase in ad on a NEOCLASSICAL lras curve always lead to ?
inflation. because the neoclassical lras curve is vertical it means that the economy is always operating at full employment so any shift out in AD will always be inflationary w no increase in output
2 of 18
what way will the SRAS shift is there is a decrease in costs
to the right
price level will decrease and real gdp will increase
3 of 18
how would a decrease in oil prices affect AS and what diagram would you use ?
decrease in oil price - lower costs of production - afford to produce more - will supply more - sras shifts outwards and real gdp increases
4 of 18
if there is an increase or decrease in supply what does the effect depend on ?
ao4
effect depends on where we are along the lras
5 of 18
what are the three points of the keynasian LRAS curve called
spare capacity , bottleneck, flip
when theres spare capacity theres lots of resources available so easy to increase output
full employment is when cant produce anymore
6 of 18
what is an exchange rate ?
teels us how much of one currency can be exchanged for another
7 of 18
why would an induvial sell or supply pounds ?
when they want to exchange pounds for a different currency, this may be for tourism abroad where UK consumers sell their pounds in exchange for foreign consumers or to pay for imports
8 of 18
whats the impact of a depreciation of the pound?
if the pound depreciates it can buy less foreign currency as it is less valuable, this makes foreign imports more expensive - WPIDEC
9 of 18
explain the impact of an appreciation of the £ on imports
appreciation means that each £ gets more foreign currency so we need fewer £s to buy foreign imports as imports become cheaper
10 of 18
explain the impact of a appreciation of the £ on exports ?
each £ gets more foreign currency - foreigners need more foreign currency as expprts become more expensive because the pound is worth more
11 of 18
how does an appreciation in the pound affect AD ?
makes improst cheaper and exports dearer this increased demand for imports and reduces demand for exports, since imports are a neg component of AD, AD wil decrease. A decrease in exports will also decrease this - opposite for depreciation
12 of 18
what is the impact of installation of high speed broadband across a country ?
high speed broadband will increase labour productivity which is likely to increase D for labout - increases in productivity are likely to affect labout supply
13 of 18
explain how an increase in productivity will affect demand for labour ?
may increase D for labour bc each worker is producing more goods so firms will want to hire more workers to make more profit BUT may decrease D for labour bc firms only require a set amount of output n so increase productivity could lead to job losses
14 of 18
what is the impact of a decrease in the cost of capital and labour ?
labour and capital are substitues, as cost of capital falls firms will choose capital over labour n so labour demand will decrease - causing a left shift in labour demand
15 of 18
what will happen to demand for labour as wages increase
as wages increase firms will demand less labour as higher costs and workers will supply more labour as want higher wages
16 of 18
what affect could a lower cost of capital have on demand for labour
because they are substitues as the cost of capital decreaes the demand for labour will decrease as firms will want more capital HIDO the % of labour cost s in terms of actual costs
17 of 18
what will happen to the labour market if there is an increase in migration ?
increase migration - decrease labpur supply - shift left
increase in immigration - increase labour supply - need wages as less to spend
18 of 18

Other cards in this set

Card 2

Front

what does an increase in ad on a NEOCLASSICAL lras curve always lead to ?

Back

inflation. because the neoclassical lras curve is vertical it means that the economy is always operating at full employment so any shift out in AD will always be inflationary w no increase in output

Card 3

Front

what way will the SRAS shift is there is a decrease in costs

Back

Preview of the front of card 3

Card 4

Front

how would a decrease in oil prices affect AS and what diagram would you use ?

Back

Preview of the front of card 4

Card 5

Front

if there is an increase or decrease in supply what does the effect depend on ?
ao4

Back

Preview of the front of card 5
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