With an upward-sloping short-run aggregate supply curve, firms respond to a change in aggregate demand by adjusting:
A)both prices and quantities in the short run.
B)prices but not quantities in the short run.
C)quantities but not prices in the short run.
D)neither prices nor quantities in the short run.

Question

Quizplus · Accepted Answer

In the short run, firms adjust both prices and quantities in response to changes in aggregate demand. This is because in the short run, some prices (like wages) are sticky or slow to adjust, leading firms to respond to increased demand by raising prices and increasing production to meet the demand, hence adjusting both prices and quantities.

With an Upward-Sloping Short-Run Aggregate Supply Curve, Firms Respond to a Change