The equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level),where a is a positive number,represents
A)an upward-sloping short-run aggregate supply curve
B)a vertical short-run aggregate supply curve
C)a downward-sloping aggregate demand curve
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The equation given represents the formula for an upward-sloping short-run aggregate supply curve, where the quantity of output supplied is determined by the natural rate of output and the difference between actual and expected price levels. As a increases, the curve becomes steeper, reflecting a greater responsiveness of output to changes in price levels.

The Equation: Quantity of Output Supplied = Natural Rate of Output