The steepness of the short-run aggregate supply curve depends on
A)the price level
B)a larger than expected simple multiplier
C)a smaller than expected simple multiplier
D)the increase only in labor costs as output expands
E)how sharply production costs increase as output expands

Question

Quizplus · Accepted Answer

The steepness of the short-run aggregate supply curve depends on how sharply production costs increase as output expands. If production costs (such as wages, raw material prices, etc.) increase significantly as output expands, then the short-run aggregate supply curve will be steeper, meaning that a relatively small change in price level will result in a large change in output. Conversely, if production costs do not increase much as output expands, then the short-run aggregate supply curve will be flatter, meaning that a larger change in price level will be needed to produce the same change in output.

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