Advertisements
Advertisements
Question
Answer in detail.
What is Aggregate Supply? Explain the determinants of Aggregate Supply.
Advertisements
Solution
Aggregate supply indicates the total amount of goods and services produced within an economy at a given the general (or overall) price level during an accounting period. The aggregate supply function is represented as follows.
`AS = f(barN,barL,barK,barT)`
where,
AS = Aggregate supply
N = Natural resources
L = Labour
K = Stock of capital
T = State of technology
i. Natural resources: Natural resources include the gifts of nature like fertile land, weather conditions, adequate rainfall, flora and fauna, perennial rivers etc. All these factors act in favour of production. The aggregate supply of a country bestowed with these natural resources will be higher than the one with lower availability of natural resources.
ii. Labour: Availability of skilled and motivated labour is another determinant of supply. Highly skilled, efficient and productive labour force is better able to contribute to the production process. In this regard availability of skilled labour has a positive affect on the aggregate supply.
iii. Capital: Capital is essential in the production process. Capital helps in acquiring raw materials, equipments, plant and machinery, buildings etc which are essential for increasing the production and productivity. However, the accumulation of capital in an economy depends on the level of saving and investment. The greater the level of saving and investment, greater is the capital accumulation, thereby, greater is the impact on aggregate supply.
iv. State of technology: The state of technology greatly affects the level of production and supply in the economy. Modern and advanced technology helps in icreasing the productivity and production, while lowering the cost of production. While on one hand, it helps in better utilisation of the existing resources, on the other hand, it helps in exploring new and better resources. In this manner availability of modern and advanced technology has a positive impact on the aggregate supply.
APPEARS IN
RELATED QUESTIONS
State the determinants of aggregate demand.
Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium
Explain the concept of 'excess demand' in macroeconomics. Also explain the role of 'open market operation' in correcting it.
Explain the concept of ‘deficient demand’ in macroeconomics.
What is meant by aggregate demand?
State components of aggregate demand.
Why does consumption curve not start from the origin?
Aggregate demand can be increased by ______
Define aggregate supply?
Explain the role of Repo Rate in reducing the Inflationary gap.
Name any two components of 'aggregate demand'.
Explain the role of 'Open Market Operations' in reducing Deflationary Gap
Explain with reason, whether you agree or disagree with the following statement:
Aggregate supply is influenced only by availability of natural resources.
State whether the following statements are True or False with reason:
Income earned from foreign investment is considered for aggregate demand.
What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?
Define or Explain the following concept:
Aggregate Demand
Define or Explain the following concept:
Aggregate Supply
Distinguish between:
Aggregate Demand and Aggregate Supply
Write Short note on:
Average Propensity to Consume
State with reason whether you agree or disagree with the following statement.
Aggregate demand depends only on the consumption expenditure.
State with reason whether you agree or disagree with the following statement.
Aggregate supply is influenced by the state of technology only.
Answer in detail.
Explain the equilibrium between Aggregate Demand and Aggregate Supply.
Write explanatory answer.
What is 'aggregate supply'? Explain the determinants of aggregate supply.
Explain the concept of deficient demand with the help of aggregate demand and aggregate supply curves. Discuss one physical and one monetary measure to correct it.
Answer the following question.
Describe the adjustments that may take place in an economy when ex-ante Aggregate Demand is greater than ex-ante Aggregate Supply.
Discuss the adjustment mechanism in the following situation :
Aggregate demand is lesser than Aggregate Supply.
The main component of aggregate demand is ______
On which concept does classical viewpoint depend?
Keynes theory is associated with ______
The difference between the Aggregate Demand at above full employment and Aggregate Demand at full employment is known as ______
Aggregate supply is equal to ______.
What is meant by Equilibrium income?
In case of an under-employment equilibrium, which of the following alternatives is not true?
Identify the correctly matched pair from Column A to Column B:
| Column A | Column B |
| (1) Y = AD | (a) Level of output at full employment |
| (2) Forward Multiplier | (b) Withdrawal of investment decreases income |
| (3) Paradox of Thrift | (c) People save less or same as before |
| (4) Multiplier (k) < 1 | (d) 0 < MPC < 1 |
Which of the following are the definitions of money supply in India?
A decrease in Cash Reserve Ratio will lead to ______
Which of the following statement is true?
What is the circumstance when aggregate output is determined solely by the level of aggregate demand called?
If TR is 1,00,000₹ when ₹20,000 units are sold, then AR is equal to:
The equilibrium level of income/output is established when ______
The slope of the supply curve is measured by ______.
Aggregate demand can be increased by:
When aggregate demand is greater than aggregate supply, inventories:
“In an economy ex-ante Aggregate Demand is less than ex-ante Aggregate Supply.”
Explain its impact on the level of output, income and employment.
“In an economy Planned spending is more than Planned output”.
Explain its impact on the level of output, income and employment.
Why is effective demand also known as expost demand?
With reference to Simple Keynesian model, give the meaning of ex-ante demand.
With the help of a diagram, determine the equilibrium level of output and income by using Aggregate demand and aggregate supply approach.
