2.3.2 Short-run AS

Factors Influencing Short-run AS

There are multiple factors that can influence the short-run aggregate supply (SRAS). These include:
- Changes in costs of raw materials and energy
- Changes in exchange rates (E/R)
- Changes in tax rates

A Table That Explains The Influences On Short-run Aggregate Supply (SRAS)

Change in Condition	Explanation	Impact on SRAS
Increase in costs of raw materials/energy	As the price of input costs rise, fewer goods/services can be produced with the same amount of money	SRAS decreases - shifts left
Decrease in costs of raw materials/energy	As the price of input costs decrease, more goods/services can be produced with the same amount of money	SRAS increases - shifts right
Appreciation of E/R	Producers often import raw materials Stronger currency = cheaper imports Cheaper imports = decrease in input costs Lower costs = more output	SRAS increases - shifts right
Depreciation of E/R	Producers often import raw materials Weaker currency = more expensive imports More expensive imports = increase in input costs Higher costs = less output	SRAS decreases - shifts left
Decrease in tax rates	Taxes represent an additional cost for firms Decreasing taxes = decrease in costs Lower costs = more output	SRAS increases - shifts right
Increase in tax rates	Taxes represent an additional cost for firms Increasing taxes = increase in costs Higher costs = less output	SRAS decreases - shifts left