Question

Problem 27

Answer 1

Introduction

The short-run aggregate supply curve shows the total output of goods and services that firms would be able to sell at a given price level on assumption that the price of all input remains the same. It occurs when an economy is working far below then its potential levels like in situations such as high unemployment or the great depression.
The following are two causes that cause the SRAS curve to shift:

(a) Productivity growth

(b) Costs of inputs