The _____ curve is positively sloped because some input costs are slow to change.
A) short-run aggregate supply
B) long-run aggregate supply
C) short-run aggregate demand
D) long-run aggregate demand

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is positively sloped because firms cannot change all of their input costs immediately in response to changes in the price level. For example, labor costs and interest payments may be locked into contracts, and it takes time to renegotiate these agreements. This means that in the short run, firms have limited ability to increase their output when the price level rises, leading to a positively sloped aggregate supply curve.

The _____ Curve Is Positively Sloped Because Some Input Costs