The short-run aggregate supply curve is upward-sloping because:
A)of the interest-rate effect.
B)higher price levels create incentives to expand output when resource prices remain constant.
C)of the net export effect.
D)higher price levels create an expectation among producers of still higher price levels.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward-sloping because higher price levels create incentives to expand output when resource prices remain constant. This is because producers can benefit from higher profit margins as they are able to sell their output at higher prices without incurring higher costs for their resources. However, this relationship only holds in the short run, as in the long run, resource prices are likely to adjust to reflect higher price levels, resulting in a less elastic supply curve.

The Short-Run Aggregate Supply Curve Is Upward-Sloping Because