When the price level rises from 110 to 115,the aggregate level of GDP supplied rises from $80 billion to $120 billion.This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level.
A)negative; short-run
B)positive; short-run
C)negative; long-run
D)positive; long-run

Question

Quizplus · Accepted Answer

The positive relationship between the quantity of real GDP firms are willing to supply and the price level in the short-run is known as the short-run aggregate supply curve. As the price level increases, firms are willing to produce more because they can charge higher prices for their goods and services. The increase in aggregate supply from $80 billion to $120 billion as the price level rises from 110 to 115 confirms that this is a short-run positive relationship between price level and real GDP supplied.

When the Price Level Rises from 110 to 115,the Aggregate