Which of the following describes the short-run aggregate supply curve?
A) It shows an inverse relationship between the price level and real GDP.
B) It shows the relationship between the price of labour and the aggregate quantity of labour that workers supply, other things constant.
C) It shows the relationship between the interest rate and the quantity of capital goods that firms supply, other things constant.
D) It shows the relationship between the price level and the quantity of aggregate output that firms supply, other things constant.

Question

Which of the following describes the short-run aggregate supply curve?  
A) It shows an inverse relationship between the price level and real GDP. 
B) It shows the relationship between the price of labour and the aggregate quantity of labour that workers supply, other things constant. 
C) It shows the relationship between the interest rate and the quantity of capital goods that firms supply, other things constant. 
D) It shows the relationship between the price level and the quantity of aggregate output that firms supply, other things constant.

Quizplus · Accepted Answer

The short-run aggregate supply curve shows the relationship between the price level and the quantity of aggregate output that firms supply, other things constant. This means that as the price level increases, firms are willing to produce more output, but only in the short run, as some inputs may be fixed in the short run.

Which of the Following Describes the Short-Run Aggregate Supply Curve