In an aggregate supply and aggregate demand diagram, the short-run aggregate supply curve is represented by
A) a downward sloping line relating prices and output.
B) a steeply upward sloping line relating prices and output.
C) an upward sloping but relatively flat line.
D) a vertical line at full employment.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward sloping but relatively flat due to the presence of price and wage sticky. This means that firms are able to increase their output in the short run without raising prices or wages significantly. Therefore, the short-run aggregate supply curve has a mild positive slope.

In an Aggregate Supply and Aggregate Demand Diagram, the Short-Run