The short-run aggregate supply curve is positively sloped because:
A) wages and other costs of production respond immediately to changes in prices.
B) profit is lower when prices increase, so output decreases.
C) workers are willing to work for lower wages rather than be laid off.
D) higher prices lead to higher profit and higher output.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is positively sloped because in the short run, an increase in prices can lead to an increase in output as firms are motivated by higher profits to produce more, assuming that wages and other input costs do not increase at the same rate as the selling prices.

The Short-Run Aggregate Supply Curve Is Positively Sloped Because