Consider the following equation where a is a positive number: quantity of output supplied = natural rate of output + a (actual price level - expected price level). What does this equation represent?
A) an upward-sloping short-run aggregate-supply curve
B) a vertical long-run supply curve
C) a downward-sloping aggregate-demand curve
D) an upward-sloping aggregate-demand curve

Question

Quizplus · Accepted Answer

The equation represents the short-run aggregate supply curve, which is upward-sloping due to the positive relationship between output supplied and the actual price level. The expected price level serves as a baseline, and when the actual price level exceeds expectations, firms increase output to take advantage of the higher prices.

Consider the Following Equation Where a Is a Positive Number