The short-run aggregate supply curve is a relationship between
A) unemployment and real GDP.
B) inflation and time.
C) real GDP and price level.
D) capital goods and consumer goods.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve shows the relationship between the overall price level in the economy and the quantity of goods and services that firms are willing to supply. It is based on the assumption that input prices (such as wages and raw materials) are sticky in the short-run and do not adjust rapidly to changes in the overall price level. Therefore, changes in the price level will affect the profitability of firms and their willingness to produce output in the short run. The curve slopes upward because initially, a higher price level leads to higher profits for firms and incentivizes them to increase production.

The Short-Run Aggregate Supply Curve Is a Relationship Between