The slope of the short-run aggregate supply curve depends on how sharply:
A)the marginal cost of production rises as real GDP expands.
B)the average cost of production rises as real GDP expands.
C)real GDP increases as the price level rises.
D)nominal GDP increases as the price level rises.
E)product prices change as the price level rises.

Question

Quizplus · Accepted Answer

The slope of the short-run aggregate supply curve depends on how sharply the marginal cost of production rises as real GDP expands. This is because the short-run aggregate supply curve represents the relationship between the price level and the quantity of output that firms are willing to supply, given their current production technology and input prices. As production expands, firms will need to use more and more expensive inputs, which will lead to rising marginal costs of production. This in turn will cause firms to require higher prices in order to be willing to supply additional output, resulting in a steeper short-run aggregate supply curve.

The Slope of the Short-Run Aggregate Supply Curve Depends on How