If a significant portion of firms in the economy does NOT immediately adjust product prices, then the short-run aggregate supply curve

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If a significant portion of firms in the economy does not immediately adjust product prices, then the short-run aggregate supply curve is horizontal. This is because, in the short run, firms may have to produce their output at the current cost levels while their revenue may still be based on the previous, higher prices. As a result, they are willing to supply more output at the existing price level. Therefore, the short-run aggregate supply curve is typically considered to be horizontal or relatively flat.

If a Significant Portion of Firms in the Economy Does