The short-run aggregate supply curve shows that increases in production are accompanied by higher prices.

Question

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The short-run aggregate supply curve is upward sloping, indicating that as production increases, so do prices. This is due to the fact that in the short run, many input prices are fixed, leading to higher costs of production as output increases. As a result, firms must increase prices to maintain profitability.

The Short-Run Aggregate Supply Curve Shows That Increases in Production