Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short-run aggregate supply curve:
A) slopes upward.
B) slopes downward.
C) has a constant slope.
D) None of these are true.

Question

Quizplus · Accepted Answer

The statement in the question implies that the cost of production does not rise at the same rate as the prices of final goods and services, leading to higher profit margins for producers. This encourages them to increase output, leading to an upward sloping short-run aggregate supply curve.

Because the Prices of Final Goods and Services Tend to Increase