The aggregate supply curve (short run)
A) graphs as a horizontal line.
B) is steeper above the full-employment output than below it.
C) slopes downward and to the right.
D) presumes that changes in wages and other resource prices match changes in the price level.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is typically represented as steeper above the full-employment output level because it is assumed that prices can adjust more easily when the economy is operating at or near full capacity, leading to less output response for a given increase in price level. Below full-employment output, prices and wages are more sticky downwards, leading to a flatter curve as output can increase without significant increases in the price level.

The Aggregate Supply Curve (Short Run)