The short-run aggregate supply curve has a positive slope, showing that increases in the price level will increase the quantity of aggregate output supplied by firms.

Question

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This is a basic concept in macroeconomics, known as the sticky wage theory. In the short run, nominal wages are assumed to be fixed, so when the price level increases, firms can sell their output at higher prices without having to pay higher wages. This incentivizes them to increase production, leading to a positive relationship between the price level and the quantity of aggregate output supplied.

The Short-Run Aggregate Supply Curve Has a Positive Slope, Showing