Firms are most likely to increase prices in response to an increase in aggregate demand when:
A) the aggregate demand curve is quite steep
B) the aggregate supply curve is steep
C) the aggregate supply curve is quite flat
D) the aggregate demand curve is quite flat

Question

Quizplus · Accepted Answer

When the aggregate supply curve is steep, it indicates that output cannot increase significantly without a large increase in prices, so firms are more likely to raise prices in response to increased aggregate demand.

Firms Are Most Likely to Increase Prices in Response to an Increase