2.3.1 The characteristics of AS

• Aggregate supply is the total quantity of goods and services that firms in an economy are willing and able to supply at different price levels over a given period.
• The aggregate supply curve is typically downward sloping.

  False
• If the cost of labor increases, firms may reduce the quantity they are willing to supply at each price level, shifting the aggregate supply curve to the left.
• Match the characteristics with the correct aggregate supply curve:

  Short-Run Aggregate Supply (SRAS) ↔️ Upward sloping

  Long-Run Aggregate Supply (LRAS) ↔️ Vertical
• The short-run aggregate supply curve considers a time horizon of a short period, such as a year.
• The long-run aggregate supply is independent of the price level.
• Ordering the effects of increased labor costs on SRAS and LRAS:

  1️⃣ SRAS shifts left, leading to higher prices and lower output

  2️⃣ Firms invest in new technologies

  3️⃣ LRAS remains vertical as output returns to potential capacity
• Higher oil prices increase production costs, leading firms to supply less at each price level, shifting the SRAS curve to the left.
• Match the factors with their influence on LRAS:

  Capital Stock ↔️ Increases production capacity

  Labor Force ↔️ Boosts available labor
• Investing in new infrastructure can expand the LRAS of a country.
• What is aggregate supply (AS)?

  Total quantity of goods
• The cost of production and productivity levels influence aggregate supply
• When aggregate demand increases, firms may increase supply at higher price levels.
• What does SRAS stand for?

  Short-Run Aggregate Supply
• Ordering the effects of increased labor costs on SRAS in the short and long run:

  1️⃣ SRAS shifts leftward

  2️⃣ Prices increase and output decreases

  3️⃣ Firms invest in new technologies

  4️⃣ LRAS remains vertical

  5️⃣ Output returns to potential capacity
• What are three factors that influence the SRAS curve?

  Input prices, productivity, technology
• Higher oil prices increase production costs, shifting the SRAS curve to the left
• Improved technology reduces labor costs and increases production capacity, shifting SRAS rightward.
• What does LRAS represent?

  Economy's potential output
• A more educated workforce leads to higher productivity
• Advancements in technology shift the LRAS curve to the right.
• Match the curve with its description:

  SRAS ↔️ Total supply in the short run

  LRAS ↔️ Potential output when fully employed
• Order the effects of increased productivity on SRAS and LRAS:

  1️⃣ SRAS shifts rightward

  2️⃣ Prices decrease and GDP increases

  3️⃣ LRAS remains unchanged
• What are five factors that can shift the LRAS curve?

  Capital stock, labor force, technology, education, natural resources
• Increases in capital stock shift the LRAS curve to the right
• A larger workforce leads to higher potential GDP, shifting LRAS rightward.
• What factors cause the SRAS curve to shift?

  Input prices, productivity, technology
• An increase in input prices shifts the SRAS curve leftward.
• Improved productivity or technology shifts the SRAS curve rightward
• What factors cause the LRAS curve to shift?

  Capital stock, labor force, technology, education, skills, natural resources
• An increase in capital stock shifts the LRAS curve rightward.
• Which factors shift the SRAS curve?

  Input prices, productivity, technology
• An increase in input prices shifts the SRAS curve to the left.
• Technological improvements shift the SRAS curve to the right
• What are the determinants of the LRAS curve?

  Capital stock, labor force, technology, education, skills, natural resources
• An increase in education and skills shifts the LRAS curve rightward.
• Summarize the factors that shift SRAS and LRAS in a table.

  SRAS: Input prices, productivity, technology ||| LRAS: Capital stock, labor force, technology, education, skills, natural resources
• Higher oil prices shift the SRAS curve to the left
• An increase in input prices shifts the SRAS curve leftward.
• Improved productivity shifts both SRAS and LRAS to the right