The short-run aggregate supply curve is positively sloped because:
A) business people are subject to money illusion.
B) wages are sticky.
C) workers care about nominal wages, not real wages.
D) of diminishing returns to labor.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is positively sloped because wages are sticky in the short-run, meaning they do not adjust immediately to changes in prices. As a result, when prices increase, firms can produce more output in the short run without having to pay their workers higher wages. This leads to an increase in the quantity of goods and services supplied, creating a positively sloped short-run aggregate supply curve.

The Short-Run Aggregate Supply Curve Is Positively Sloped Because