The upward slope of the short-run aggregate supply curve is based on the assumption that
A) wages and other resource prices do not respond to price level changes.
B) wages and other resource prices do respond to price level changes.
C) prices of outputs do not respond to price level changes.
D) prices of inputs are ﬂexible, while prices of outputs are ﬁxed.

Question

Quizplus · Accepted Answer

The upward slope of the short-run aggregate supply curve is based on the assumption that wages and other resource prices do not respond to price level changes. This is because in the short run, firms may have contracts or agreements with their employees that do not allow for immediate adjustment in wages in response to changes in prices. As a result, when prices rise, firms may be willing to produce more output because they have not incurred additional costs for production.

The Upward Slope of the Short-Run Aggregate Supply Curve Is