5225378
Description
Flashcards by Tara Pugal, updated more than 1 year ago
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Created by Tara Pugal
over 8 years ago
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| Question | Answer |
| What does AS measure? | the volume of goods + services produced annually the ability of an economy to meet D |
| What does SRAS show? | total planned output when prices change but the prices and productivity of factor inputs are help constant |
| What does LRAS show? | a measure of a country's potential output and is linked to the PPF |
| What is the LRAS curve assumed to look like? | vertical (doesn't change when the PL does) |
| What is the SRAS curve assumed to be? | upwards sloping |
| What happens to SRAS if ↑AD? | SRAS expands (movement along the curve) |
| What happens to SRAS if ↓AD | SRAS contracts |
| What is a shift in SRAS caused by? (6) | change in production costs commodity prices ER gov T and subsidies P of M SR shocks to SRAS |
| How to changes in production costs affect SRAS? | ↑production costs = ↓output = ↓SRAS |
| How do commodity prices affect SRAS? | ↑commodity prices = ↓output = ↓SRAS |
| How does the ER affect SRAS? | ↓ER = ↑P of M = ↓SRAS |
| How does the P of M affect SRAS? | ↓P of M = ↑SRAS |
| How do gov T and subsidies affect SRAS? | ↑T to meet environmental standards = ↑costs = ↓SRAS |
| What is the main driver of SRAS? | the level of production costs |
| In the LR what is an economy's ability to produce goods + services to meet D based on? | the state of production technology and the availability and quantity of factor inputs |
| What does an increase in LRAS show? | an increase in productive potential |
| What does productivity measure? | the efficiency of the production proces |
| What are the key factors affecting LRAS? (4) | high productivity of labour and K increased labour market participation gains from innovation and enterprise I |
| What is the productivity gap? | how much the Uk lags behind in productivity |
| How is the productivity gap measured? | by an index of constant P GDP per worked hour |
| Why does the UK lag on productivity? (4) | low rate of new I banking crisis affecting lending to firms possibly slowing rates of innovation low AD and high spare capacity |
| What is an improvement in labour productivity likely to do to PL? | ↓PL |
| What is an improvement in labour productivity likely to do to GDP? | ↑GDP (gains in AS) |
| What is an improvement in labour productivity likely to do to U? | ↓U (lower in LR) |
| What is an improvement in labour productivity likely to do to (X-M)? | ↓(X-M) (more competitive X) |
| What is an improvement in labour productivity likely to do to spare capacity? | ↑spare capacity (from a rise in SR spare capacity) |
| What is an improvement in labour productivity likely to do to I? | ↑I (profits will have increased |
| What is an improvement in labour productivity likely to do to G? | ↓G |
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