The short-run aggregate supply curve is positively sloped because
A) a short-run increase in GDP usually is accompanied by a rise in the price level.
B) many input prices are slow to change in the short run.
C) all variables are fixed in the short run.
D) a short-run increase in GDP usually is accompanied by a slower rise in the price level.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is positively sloped because many input prices, such as wages and contracts, are slow to change in the short run. This means that an increase in output in the short run requires more production and employment, which raises production costs and leads to an increase in prices to maintain profitability.

The Short-Run Aggregate Supply Curve Is Positively Sloped Because