In the short run, the aggregate supply curve of an economy is:
A)upward sloping.
B)downward sloping.
C)horizontal.
D)vertical.

Question

Quizplus · Accepted Answer

In the short run, the aggregate supply curve of an economy is upward sloping because firms can increase output in response to an increase in demand by using their existing resources more intensively or by hiring additional workers. However, as the supply of labor and other factors of production becomes more scarce, the marginal cost of producing additional output increases, causing the aggregate supply curve to become steeper and eventually vertical in the long run.

In the Short Run, the Aggregate Supply Curve of an Economy