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6 Cards in this Set
- Front
- Back
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Aggregate supply (AS)
(concept) |
Looks at the relationship between the average price of goods & the total level of production.
This curve has three distinct sections called stages, moving upward from left to right. The curve is often intersected by the AD curve, at which point is the GDP. |
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Aggregate supply, Horizontal stage
(concept) |
- "Keynesian" stage
- Means a weak economy from a recession or depression - costs are constant - production increases, with no effect on prices. |
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Aggregate supply, Intermediate stage
(concept) |
- Recovery phase
- Indicates a shortage of resources, also known as bottlenecks. - Costs go up, prices go up, GDP increases, and so does profits “companies raise prices more than cost. |
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Aggregate supply, vertical stage
(concept) |
- "Classical" stage
- economy now has full employment. No more labor resources. - Major shortages of resources - Cost and price increase, as well as inflation. - production is fixed |
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Non-price factors which influence AS
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1. Technology
-Direct relationship - Causes increase in AS - production expands outward 2. Cost of production - Inverste relationship - increase in cost of resources - production is cut back - AS decreases 3. Labor productivity - Direct relationship - unit cost decreases - profits increase - more spending on capital resources - AS increases 4. Business taxes - Inverse relationship - Inverse relationship to AS - If taxes increase, AS decreases |
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Non-price factors which influence AD
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1. Wealth
- Direct 2. Expectations - Direct 3. Taxes - Inverse 4. Gov't spending - Direct 5. Interest rates - inverse relation to AS 6. Realized Profits - inverse relation 7. Consumer spending - direct 8. Stock market - Direct |
