Which of the following phrases best explains the short-run aggregate supply curve's upward slope?
A)Actual prices equal expected prices.
B)Expected prices are higher than actual prices.
C)Output prices increase faster than input prices.
D)The real balances effect ensures a positive slope.

Question

Quizplus · Accepted Answer

In the short run, the prices of inputs, such as raw materials and labor, remain fixed, while the prices of outputs can increase due to higher demand or supply shocks. This creates a situation where output prices increase faster than input prices, leading to an upward sloping short-run aggregate supply curve. The other choices do not provide a sufficient explanation for the slope of the curve.

Which of the Following Phrases Best Explains the Short-Run Aggregate