The determinants of aggregate supply are: changes in input prices (domestic/imported resource prices), changes in productivity, and changes in legal-institutional environment (business taxes and subsidies, government regulations). Decreasing the aggregate supply will cause a shock to the short-term market and result in a leftward shift, an increase in price level, and a decrease in real production. An example is a depletion of existing mineral deposits causing a shortage of material to produce an item, thus decreasing supply and raising the price level for that product, as it is in high demand. Increasing aggregate supply will cause a shock to the short-run market and result in a rightward shift of the curve, a decrease in the price level, and an increase in real production. An example is an increase in technology would allow companies to produce more goods at a higher efficiency
The determinants of aggregate supply are: changes in input prices (domestic/imported resource prices), changes in productivity, and changes in legal-institutional environment (business taxes and subsidies, government regulations). Decreasing the aggregate supply will cause a shock to the short-term market and result in a leftward shift, an increase in price level, and a decrease in real production. An example is a depletion of existing mineral deposits causing a shortage of material to produce an item, thus decreasing supply and raising the price level for that product, as it is in high demand. Increasing aggregate supply will cause a shock to the short-run market and result in a rightward shift of the curve, a decrease in the price level, and an increase in real production. An example is an increase in technology would allow companies to produce more goods at a higher efficiency