Long Run Aggregate Supply Quiz

A time period long enough that all factors of production can be changed.

The maximum level of output an economy can produce using all factors of production at sustainable levels.

The classical LRAS curve is fixed and vertical at the full employment level of output.

<p>Because classical economists believe that there is only one long-run equilibrium (YF1) which the economy will always return to in the long run.</p> Signup and view all the answers

<p>Because they believe that the potential output of the economy is dependent on the quantity and quality of all factors of production and is independent of the price level.</p> Signup and view all the answers

<p>Neo-classical economists believe that the economy will operate at the natural rate of unemployment, whereas Keynesians believe that even in the long run, there can be unemployment above the natural rate.</p> Signup and view all the answers

<p>As this indicates a large level of spare capacity in the economy, Keynesians believe that output can increase without putting excess pressure on existing factors of production.</p> Signup and view all the answers

<p>Real GDP can increase without any demand-pull inflationary pressure.</p> Signup and view all the answers

<p>Pressure is placed on existing factors of production, which increases the price of inputs and thus the cost of production for firms in an economy.</p> Signup and view all the answers

<p>That there comes a point where no spare capacity exists and so real GDP cannot increase without large increases in inflationary pressure therefore the LRAS curve becomes vertical.</p> Signup and view all the answers

<p>A change in the quantity or quality of factors of production or productive efficiency.</p> Signup and view all the answers

<p>Labour productivity, investment, infrastructure improvement, competition, immigration, the institutional structure of the economy.</p> Signup and view all the answers

<p>Any improvements in education or adult training will improve their skills and thus the quality of human capital.</p> Signup and view all the answers

<p>By upgrading a firm's machinery, improving technology, or building a new factory will improve both the quantity and quality of the economy's capital stock.</p> Signup and view all the answers

<p>Spending on transport infrastructure/improving the quality of roads reduces the cost of production of firms as transporting goods and services around the country becomes quicker and more efficient.</p> Signup and view all the answers

<p>Privatization, trade liberalization, and deregulation will force firms to be as efficient as possible.</p> Signup and view all the answers

<p>An increase in the number of immigrants of working age will lead to an increase in the size of the labor force.</p> Signup and view all the answers

<p>Banks and other financial intermediaries perform a crucial role of accepting deposits and converting them into loans for entrepreneurs and firms.</p> Signup and view all the answers