If short-run aggregate supply is upward sloping, the assumption is that
A) prices are perfectly sticky.
B) prices are set by government mandate.
C) prices are constant.
D) prices adjust gradually.

Question

Quizplus · Accepted Answer

If short-run aggregate supply is upward sloping, it means that prices can adjust gradually in response to changes in demand and supply. This is because businesses may have some flexibility in adjusting prices in the short run, even if they are not perfectly flexible. Therefore, answer choice D is the best choice. The other answer choices are not consistent with an upward sloping short-run aggregate supply curve.

If Short-Run Aggregate Supply Is Upward Sloping, the Assumption Is