If producers believe that the increase in their relative prices is small relative to the increase in the general price level,then the slope of the short-run aggregate supply curve will be
A)zero.
B)small.
C)large.
D)negative.

Question

Quizplus · Accepted Answer

The slope of the short-run aggregate supply curve will be large if producers believe that the increase in their relative prices is small relative to the increase in the general price level. This is because producers will be more willing to increase output if they believe that they will be able to maintain their profit margins.

If Producers Believe That the Increase in Their Relative Prices