The short-run aggregate supply curve
A) is vertical, and the long-run aggregate supply curve is vertical.
B) slopes upward, and the long-run aggregate supply curve also slopes upward.
C) slopes upward, but the long-run aggregate supply curve is horizontal.
D) slopes upward, but the long-run aggregate supply curve is vertical.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve slopes upward because, in the short run, prices of inputs (like wages) may not adjust immediately to changes in the price level, leading to an increase in output when prices rise. However, the long-run aggregate supply curve is vertical, reflecting the idea that in the long run, an economy's output is determined by its resources, technology, and institutions, not by the price level.

The Short-Run Aggregate Supply Curve