ECONOMICS
AGGREGATE SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Yes, I understand this from the notes
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No, I don’t understand this from the notes
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No, I don’t understand this, as I have not read the notes
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None of the above
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Detailed explanation-1: -What causes shifts in SRAS? When the price level changes and firms produce more in response to that, we move along the SRAS curve. But, any change that makes production different at every possible price level will shift the SRAS curve. Events like these are called “shocks” because they aren’t anticipated.
Detailed explanation-2: -Causes of Shift in Short-Run Aggregate Supply Some of the factors that would shift the SRAS curve include changes in commodity prices, nominal wages, productivity, and future expectations about inflation. In general, a shift to the right of the SRAS curve lowers the overall prices and raises the output produced.
Detailed explanation-3: -A decrease in aggregate demand will cause the short-run aggregate supply curve shift to rightward or downward direction because workers and firms will adjust their expectation of wages and prices downwards and they will accept lower wages and prices.
Detailed explanation-4: -Changes in resource prices. If the price of oil and other factors of production decrease (those that are not sticky) then firms will seek to produce more. Technology changes. Expectation of future prices.