The short-run aggregate supply curve is _____, and the long-run aggregate supply curve is _____.
A) vertical; upward sloping
B) upward sloping; vertical
C) downward sloping; vertical
D) vertical; horizontal

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward sloping because, in the short run, firms can increase output by utilizing more of their existing resources, such as labor and capital, which can lead to higher production costs and thus higher prices. In contrast, the long-run aggregate supply curve is vertical, reflecting the idea that in the long run, an economy's potential output is determined by its resources, technology, and institutions, and is not affected by the price level.

The Short-Run Aggregate Supply Curve Is _____, and the Long-Run