The aggregate supply curve (short run) is upsloping because
A) wages and other resource prices match changes in the price level.
B) the price level is ﬂexible upward but inﬂexible downward.
C) per-unit production costs rise as the economy moves toward and beyond its full- employment real output.
D) wages and other resource prices are ﬂexible upward but inﬂexible downward.

Question

Quizplus · Accepted Answer

In the short run, the aggregate supply curve is upsloping because per-unit production costs rise as the economy moves toward and beyond its full-employment real output. This is due to the fact that the production costs of firms increase as they try to produce more output in response to higher demand, such as hiring more workers and paying higher wages, leading to a higher overall price level. Wages and other resource prices may not match changes in the price level in the short run, and the price level may be flexible both upward and downward.

The Aggregate Supply Curve (Short Run) Is Upsloping Because