The economy's SRAS curve is:
A) upward sloping.
B) downward sloping.
C) vertical.
D) horizontal.

Question

Quizplus · Accepted Answer

The SRAS (Short-Run Aggregate Supply) curve depicts the relationship between the price level and the quantity of goods and services produced in the short run, taking into account the level of labor, capital, and technology. In the short run, the SRAS curve is upward sloping because when the price level rises, firms can earn higher profits, leading to an increase in output. However, over time, the SRAS curve becomes less elastic, and the economy reaches its potential output level at the intersection of the SRAS and the LRAS (Long-Run Aggregate Supply) curves, which is a vertical line.

The Economy's SRAS Curve Is