The upward slope of the dynamic aggregate supply curve indicates that, holding other factors constant, high levels of economic activity are associated with:
A) the natural level of output.
B) the inflation target.
C) positive supply shocks.
D) high inflation.

Question

Quizplus · Accepted Answer

The upward slope of the dynamic aggregate supply curve reflects the relationship between economic activity and inflation. As economic activity increases, firms raise prices due to higher demand for goods and services, leading to higher inflation. This is why high levels of economic activity are associated with high inflation, holding other factors constant.

The Upward Slope of the Dynamic Aggregate Supply Curve Indicates