The short-run aggregate supply curve is relatively flat because
A) in the short run, prices are flexible but output is equal to potential output.
B) in the long run, prices are flexible but output is equal to potential output.
C) in the short run, prices do not change very much but output may be above, below, or equal to potential output.
D) in the long run, prices are fixed and output is equal to potential output.

Question

Quizplus · Accepted Answer

In the short run, prices may not change very much due to factors such as sticky wages or contracts, but output may still be different from potential output. This leads to a relatively flat short-run aggregate supply curve, indicating that firms can increase output without a significant increase in prices.

The Short-Run Aggregate Supply Curve Is Relatively Flat Because