Economics and Statistics

Determinants of aggregate supply: In the short run, a change in AD will cause output to change and price level to change. In the long run a change in AD will result in a change in price level only. Shifts in SRAS: The SRAS will shift to the left if there an increase in the costs of productions. This includes: A wage increase, this can be achieved by strong labor unions, higher minimum wage, and a decrease in the labor force. An increase in business taxes will increase costs, thereby shifting the SRAS to the left. A general increase in input costs. Just as the previous point, this will increase the cost of production, shifting the SRAS to the left. An increase interest rates, it is more expensive to replace machines (K), this will push to SRAS to the left. An increase in costs of production is known as a negative supply shock, which causes the SRAS curve to shift to the left, increasing the equilibrium price level, and reducing the equilibrium output. The SRAS will shift to the...