The aggregate supply curve depicts the relationship between:
A) the unemployment rate and the total quantity of goods and services that firms supply.
B) the cost of inputs and the total quantity of goods and services that firms supply.
C) the cost of labor and the total quantity of goods and services that firms supply.
D) the level of prices and the total quantity of goods and services that firms supply.

Question

Quizplus · Accepted Answer

The aggregate supply curve shows the relationship between the level of prices (represented by the general price level or the GDP deflator) and the total quantity of goods and services that firms are willing to supply. As the level of prices rise, firms are willing to produce more output due to increased profits and vice versa. The cost of inputs and labor may impact the position of the aggregate supply curve, but they are not the only factors that affect it.

The Aggregate Supply Curve Depicts the Relationship Between