IB Econs AS

What does aggregate supply (AS) represent?

• The planned level of output of goods and services that firms are willing and able to supply at different average price levels.
• The total demand for goods and services in an economy.
• The level of government spending in the economy.
• The total exports of an economy.

In the short run, what assumptions are made regarding wage rates and the state of technology?

• They are variable and adjust quickly.
• Wage rates are fixed while technology adjusts.
• Both are assumed to be fixed.
• Wage rates adjust but technology is fixed.

Why is the short-run aggregate supply (SRAS) curve upward sloping?

• Because higher average prices allow firms to increase output by using overtime labor and other variable factors.
• Because lower average prices increase consumer demand.
• Because increased technology reduces production costs.
• Because higher average prices lower fixed costs.

What does a flatter SRAS curve indicate about an economy's spare capacity?

• There is little spare capacity.
• There is a greater degree of spare (unused) capacity.
• The level of spare capacity is irrelevant to the SRAS slope.
• The economy is operating at full capacity.

Which of the following is NOT included in the SRAS determinants?

• Labour costs
• Interest rates
• Transportation costs
• Tax rates

How do indirect taxes affect the SRAS curve?

• They shift the SRAS curve to the right by lowering costs.
• They have no effect on the SRAS curve.
• They shift the SRAS curve to the left by increasing production costs.
• They shift the SRAS curve upward without changing its position.

What is the effect on the SRAS curve if production costs increase?

• SRAS shifts to the right.
• SRAS remains unchanged.
• SRAS shifts to the left.
• SRAS becomes horizontal.

Which scenario is likely to cause a rightward shift in the SRAS curve?

• An increase in indirect taxes.
• A fall in production costs.
• A rise in raw material costs.
• An increase in transportation costs.

What is one consequence of a leftward shift in the SRAS curve?

• Lower average price levels and expanded aggregate demand.
• Higher average price levels and a contraction in aggregate demand.
• An increase in full employment output.
• No impact on the general price level.

According to the monetarist/new classical view, what is the shape of the long‐run aggregate supply (LRAS) curve?

• Upward sloping.
• Downward sloping.
• Horizontal.
• Vertical.