Question

What factors may cause the short run and the long run aggregate supply curves to shift?

Answer 1

Ans.

Factors that cause SRAS(short run aggregate supply) to shift are -

1. Price Level changes in raw material
2. cost of production which includes subsidies and taxes
3. wage rate

for Eg , increase in wages and price of raw materials will cause the SRAS curve to shift upward which shows decrease in SRAS. and vice - versa.

Factor that cause LRAS ( Long run aggregate supply ) to shift is -

1. shift is caused by economies productivity so shift occurs when factor of production quantity changes , because LRAS is a vertical in nature .

So , for example if the economies total output or production increases , then this will cause the LRAS to shift rightward and when productivity decreases , the curve will shift to left.

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