The positive relationship between the short-run aggregate supply function and the price level suggests that,in the short run,
A)firms produce more output as the price level falls.
B)firms produce more output as the price levels rises.
C)wages increase along the aggregate supply function.
D)lower price levels are more profitable for the firm.

Question

Quizplus · Accepted Answer

The positive relationship between the short-run aggregate supply function and the price level suggests that as the price level rises, firms are willing to produce more output. This is because higher prices mean higher profits for firms, so they are incentivized to increase production to meet the higher demand for their goods and services.

The Positive Relationship Between the Short-Run Aggregate Supply Function and the Price