If a significant portion of firms in the economy does not immediately adjust product prices, then the short-run aggregate supply curve

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In the short run, if firms do not immediately adjust their prices, the short-run aggregate supply curve will be horizontal. This is because any increase in demand for goods or services will lead to an increase in output and employment, and not an increase in prices. Similarly, a decrease in demand will lead to a decrease in output and employment, and not a decrease in prices. Only in the long run, when all prices are fully adjusted, will the aggregate supply curve slope upward.

If a Significant Portion of Firms in the Economy Does