The short-run aggregate supply curve is upward sloping because wages rise more slowly than output prices.

Question

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The short-run aggregate supply curve is upward sloping because as output prices increase, firms are able to increase their quantity supplied in the short run due to factors such as unused capacity, increased overtime, and increased hiring. However, wages may not rise as quickly in the short run, leading to a temporary increase in profits for firms.

The Short-Run Aggregate Supply Curve Is Upward Sloping Because Wages