IB Econs

What does the short‐run aggregate supply (SRAS) curve represent?

• Total planned national output from domestic firms at different average price levels
• Total consumer expenditure on goods and services
• Total planned government spending on infrastructure
• Total planned exports from an economy

Why is the SRAS curve upward sloping in the short run?

• Because higher average prices reduce wage costs
• Because higher average prices entice firms to raise their output
• Because increased consumer confidence boosts demand
• Because lower raw material costs are assumed

In the short run, which factors are assumed to be fixed?

• Wage rates and the state of technology
• Consumer spending and business taxes
• Interest rates and export earnings
• Government spending and import levels

What does a steeper SRAS curve indicate about spare capacity in an economy?

• A greater degree of spare capacity
• A lesser degree of spare capacity
• No relation to spare capacity
• That spare capacity is increasing rapidly

The acronym LITRE helps remember determinants of what aspect of SRAS?

• Components of aggregate demand
• Shifts in aggregate demand
• Factors affecting production costs
• Stages of the Keynesian AS curve

Which of the following is NOT included in the LITRE determinants for production costs?

• Labour costs
• Interest rates
• Tax rates
• Raw material costs

How do indirect taxes affect the SRAS curve?

• They shift the SRAS curve to the right
• They have no effect on the SRAS curve
• They reduce AS by increasing production costs
• They boost firms’ profitability

An increase in which factor is most likely to shift the SRAS curve to the left?

• A fall in labour costs
• A decrease in indirect taxes
• An increase in raw material costs
• An improvement in transportation costs

What is the effect on SRAS when indirect taxes fall?

• SRAS shifts to the left
• SRAS shifts to the right
• No change in SRAS
• SRAS becomes vertical

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

• Upward sloping
• Horizontal
• Vertical
• Downward sloping