Figure 17-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.

-Refer to Figure 17-3. What is measured along the vertical axis of the left-hand graph?

Question

Figure 17-3. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the left-hand diagram, Y represents output and on the right-hand diagram, U represents the unemployment rate.
  
-Refer to Figure 17-3. What is measured along the vertical axis of the left-hand graph?

Quizplus · Accepted Answer

The vertical axis of the left-hand graph measures the price level, which represents the average level of prices of goods and services in the economy. As the price level increases, the quantity of output supplied by firms in the short-run also increases due to the firms' ability to charge higher prices for their output.