The positively sloped short-run aggregate supply curve reflects the assumption that factor prices are
A)more flexible than output prices.
B)less flexible than output prices.
C)fixed in the long run.
D)perfectly flexible in both the short run and the long run.

Question

Quizplus · Accepted Answer

In the short run, factor prices (like wages) are less flexible than output prices, leading to a positively sloped aggregate supply curve as firms respond to higher prices by increasing output.

The Positively Sloped Short-Run Aggregate Supply Curve Reflects the Assumption