The short-run aggregate supply curve is:
A) upward-sloping.
B) downward-sloping.
C) horizontal.
D) vertical.

Question

Quizplus · Accepted Answer

The short-run aggregate supply (SRAS) curve is upward-sloping due to the sticky wages and prices assumption. In the short-run, firms may not be able to adjust their prices or wages immediately in response to changes in demand, leading to changes in output and employment instead. Therefore, as the price level increases, firms are willing to produce more due to higher expected profits, resulting in a positive relationship between the price level and real GDP.

The Short-Run Aggregate Supply Curve Is