The positive relationship between short- run aggregate supply and the price level indicates that, in the short run,
A)firms produce more output as the price level rises.
B)the money wage rate increases when moving along the short- run aggregate supply curve.
C)firms produce more output as the price level falls.
D)lower price levels are more profitable for firms.

Question

Quizplus · Accepted Answer

In the short run, as the price level rises, firms are willing to produce more output because higher prices can lead to higher revenues, assuming costs remain constant.

The Positive Relationship Between Short- Run Aggregate Supply and the Price