The short-run aggregate supply curve is upward-sloping because:
A) in the short run,an increase in spending leads to an increase in output.
B) wages increase with an increase in output in the short run.
C) wages and prices are sticky in the short run.
D) an increase in spending only leads to an increase in prices.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward-sloping because in the short run, wages and prices are sticky, meaning they do not adjust immediately to changes in demand or supply. As a result, an increase in demand for goods and services will increase output in the short run, but without a corresponding increase in wages and prices. This leads to higher profits for firms and an increase in aggregate supply. However, in the long run wages and prices are expected to adjust fully, meaning the aggregate supply curve becomes vertical at potential output.

The Short-Run Aggregate Supply Curve Is Upward-Sloping Because