Determinants of the SRAS:
- Input prices
- Domestic resource prices
- Wages (75%)
- Cost of capital
- Raw material
- Foreign resource prices
- Strong $ = lower price
- Weak $ = higher price
- Market price
- Monopolies and cartels that control resources control the price of those resources
- Increase in resource prices cause SRAS to go left
- Decrease in resource prices cause SRAS to go right
- Productivity
- Total input/total output
- More productivity = lower unit production cost causes SRAS to go right
- Lower productivity = higher unit production cost causes SRAS to go left
- Legal institutional environment
- Taxes and subsidies
- Taxes ($ to gov’t) on business increase per unit production cost causes SRAS to go left)
- Subsidies ($ from gov’t) to business reduce Per unit production cost causes SRAS to go right
- Government regulation
- Everment regulation creates a cost of compliance. Causes SRAS to go left
- Deregulation reduces complains cost. Causes SRAS to go right
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