The aggregate supply curve in the short run is different from the aggregate supply curve in the long run because of:
A) the existence of sticky prices in the short run.
B) the crowding out effect.
C) the recurring nature of supply shocks.
D) the wealth effect.

Question

Quizplus · Accepted Answer

The existence of sticky prices in the short run means that some prices may be slow to adjust to changes in demand and supply conditions. This can cause the short-run aggregate supply curve to slope upwards, as firms are willing to supply more output at higher prices due to the higher marginal benefits of production. In the long run, however, prices are more flexible and can adjust to changes in demand and supply conditions, resulting in a vertical aggregate supply curve.

The Aggregate Supply Curve in the Short Run Is Different