The short-run aggregate supply curve is drawn with:
A)the price level on the vertical axis and real GDP on the horizontal axis.
B)the price level on the vertical axis and nominal GDP on the horizontal axis.
C)nominal GDP on the vertical axis and real GDP on the horizontal axis.
D)real GDP on the horizontal axis and the rate of unemployment on the vertical axis.

Question

The short-run aggregate supply curve is drawn with:
A)​the price level on the vertical axis and real GDP on the horizontal axis.
B)​the price level on the vertical axis and nominal GDP on the horizontal axis.
C)​nominal GDP on the vertical axis and real GDP on the horizontal axis.
D)​real GDP on the horizontal axis and the rate of unemployment on the vertical axis.

Quizplus · Accepted Answer

The short-run aggregate supply curve reflects the relationship between the price level and the quantity of goods and services that firms are willing and able to supply in the short run. Therefore, it is typically drawn with the price level on the vertical axis and real GDP (or output) on the horizontal axis, as changes in the price level affect firms' marginal cost and profit margins, and thus their level of production. The other answer choices are not accurate representations of the short-run aggregate supply curve.

The Short-Run Aggregate Supply Curve Is Drawn With