If there is a general rise in demand in the economy, but firms assume that their cost curves are given, then the aggregate supply curve will be upward- sloping.

Question

Quizplus · Accepted Answer

When there is a general rise in demand in the economy, and firms assume their cost curves are fixed, they will respond to increased demand by raising prices and increasing output, leading to an upward-sloping aggregate supply curve in the short run. This is because, in the short run, firms have limited capacity and face increasing costs as they increase production.

If There Is a General Rise in Demand in the Economy