Aggregate supply is
A) the relationship between the unemployment rate and real GDP.
B) the relationship between labor employment and the real (inflation adjusted) wage rate.
C) desired spending on output at different price levels.
D) the relationship between the quantity of real GDP and the price level.

Question

Quizplus · Accepted Answer

Aggregate supply is the relationship between the quantity of real GDP and the price level. This relationship shows how much output firms are willing and able to supply at different price levels. As prices rise, firms are willing to supply more output because they are able to earn higher profits, which in turn means a larger quantity of goods and services will be produced. Conversely, as prices fall, firms are willing to supply less output because they will earn smaller profits, leading to a decrease in the quantity of goods and services produced.

Aggregate Supply Is