The steepness of the short-run aggregate supply curve depends primarily on
A)the length of time for which resource prices are fixed
B)the length of time for which output prices are fixed
C)the difference between the expected and the actual price levels
D)how quickly employment increases as output expands
E)how quickly production costs increase as output expands

Question

Quizplus · Accepted Answer

The steepness of the short-run aggregate supply curve primarily depends on how quickly production costs increase as output expands. If production costs increase slowly as output expands, the curve will be flatter, but if they increase quickly, the curve will be steeper. This is because firms will be less willing to increase production if it leads to significantly higher costs. Factors such as the length of time for which resource prices or output prices are fixed can also impact the position and shape of the curve, but they are not the primary determinants of its steepness.

The Steepness of the Short-Run Aggregate Supply Curve Depends Primarily