If there was no profit effect, but there was a misperception effect in the short run, then SRAS is ____ and LRAS is ____.
A)upward sloping; upward sloping
B)upward sloping: vertical
C)vertical; upward sloping
D)vertical; vertical

Question

If there was no profit effect, but there was a misperception effect in the short run, then SRAS is ____ and LRAS is ____.
A)​upward sloping; upward sloping
B)​upward sloping: vertical
C)​vertical; upward sloping
D)​vertical; vertical

Quizplus · Accepted Answer

In the short run, the Aggregate Supply (SRAS) is upward sloping due to misperceptions, menu costs, and sticky wages. In the long run, the Aggregate Supply (LRAS) is vertical, reflecting the economy's potential output, independent of the price level.

If There Was No Profit Effect, but There Was a Misperception