The aggregate supply curve shows the relationship between
A)potential GDP and the price level.
B)potential GDP and real GDP.
C)the quantity of real GDP supplied and the price level.
D)the quantity of real GDP supplied and the interest rate.
E)potential GDP and the aggregate demand curve.

Question

Quizplus · Accepted Answer

The aggregate supply curve shows the relationship between the quantity of real GDP supplied by firms and the price level in the economy. As the price level increases, firms are incentivized to produce more output, leading to an expansion in real GDP. The reverse is also true- as the price level falls, firms will reduce production and real GDP will contract. The aggregate supply curve is upward sloping, reflecting the positive relationship between price level and real GDP supplied.

The Aggregate Supply Curve Shows the Relationship Between