The short-run aggregate supply curve is upward sloping because in the short run the
A) money wage rate changes but the price level does not.
B) price level changes but the money wage rate does not.
C) both the money wage rate and the price level change.
D) neither the money wage rate nor the price level can change.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward sloping because, in the short run, prices of goods and services can change while the money wage rates (the cost of labor) and other input prices tend to remain fixed or adjust more slowly. This means that as the price level increases, the real wage (the purchasing power of wages) falls, making it more profitable for firms to increase output, hence the upward slope.

The Short-Run Aggregate Supply Curve Is Upward Sloping Because in the Short