T3 Wk 8 - SRAS/LRAS

Which of the following will NOT shift SRAS left

• An increase in the household income tax rate

• An increase in the minimum wage

• An increase in electricity and gas prices

• A depreciation of the local currency

Which of the following will NOT shift LRAS right

• An increase in skilled migration

• An increase in capital resources in the economy

• An increase in oil prices

• An improvement to the standard of the public education system

Why is SRAS upward sloping

• Along a 1 SRAS curve, resource prices are fixed. Therefore if the price level of goods and services rises, this means firms are more willing or able to produce more output.

• The SRAS curve represents costs of production

• Because in the short run, the quantity and quality of resources is fixed.

• Along 1 SRAS curve the prices of goods and services are fixed, so as prices of resources rise, firms are encouraged to supply more output.

Which of the following would cause SRAS AND LRAS to shift to the right

• An increase in the standard of the healthcare system

• Lower transport and shipping costs

• A tsunami which wipes out 30% of the economies towns and population

• A reduction of industry subsidies.

Which of the following would cause SRAS to shift to the right

• A depreciation of the local currency

• A decrease in corporate profit tax rates.

• Reduced government spending on research and development funding.

• An increase in crude petroleum prices.