The short run aggregate supply curve assumes that in the short- run:
A) the inflation rate is zero, that is, the economy is stagflated.
B) the unemployment rate is equal to the natural rate of unemployment.
C) the economy does not experience supply shocks.
D) prices are slow to adjust.

Question

Quizplus · Accepted Answer

The short run aggregate supply curve assumes that prices are slow to adjust, meaning that the curve is relatively flat in the short run. This is because in the short run, firms may have fixed contracts, wages, or prices that cannot be adjusted immediately in response to changes in the economy. Therefore, changes in output in the short run can be achieved without significant changes in prices. The other options are not accurate descriptions of the short run aggregate supply curve.

The Short Run Aggregate Supply Curve Assumes That in the Short-