Because the prices of final goods and services tend to increase more quickly than the prices of inputs, the short run aggregate supply curve is:
A) upward sloping.
B) downward sloping.
C) perfectly elastic.
D) perfectly inelastic.

Question

Quizplus · Accepted Answer

The given statement suggests that the prices of inputs (i.e. factors of production such as labor, raw materials, etc.) do not rise as quickly as the prices of final goods that are produced using these inputs. Hence, in the short run, firms can increase their production without facing a significant increase in input costs, leading to an upward slope of the short run aggregate supply curve.

Because the Prices of Final Goods and Services Tend to Increase