Changes in price level are represented by movements along
the AD and AS curves.
The AD curve is shifted by factors such as exchange rate,
distribution of income, interest rates, expectations, foreign income, monetary
and fiscal policies.
The AS curve is shifted by factors which affect costs of
production, for example price of raw materials and wage rates.
The LRAS curve is shifted by the factors which affect
potential output: for example entrepreneurship, technological developments, size
of workforce, size of capital stock, levels of education, investment and labour
productivity. In other words, any long term change in quality and/or quantity
of the factors of production.
An increase in cyclical unemployment will shift the AD curve
leftwards.
Economic growth is represented by a rightward shift of the
LRAS curve.
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