The short-run version of aggregate supply assumes that
A) product prices are ﬁxed, while resource prices are ﬂexible.
B) product prices are ﬂexible, while resource prices are ﬁxed.
C) both input and product prices are ﬂexible.
D) both input and product prices are ﬁxed.

Question

Quizplus · Accepted Answer

The short-run version of aggregate supply assumes that product prices are flexible, while resource prices are fixed. This means that changes in demand for goods and services will affect the quantity of output supplied, but changes in input prices (such as wages or raw materials) will not. This assumption is based on the idea that businesses may not be able to adjust their input prices immediately in response to changes in demand, but can adjust their output prices more quickly.

The Short-Run Version of Aggregate Supply Assumes That