The shape of the short run aggregate supply curve is generally believed to be
A) a decreasing function of the price level
B) an increasing function of the interest rate
C) an increasing function of the price level
D) vertical
E) backward-bending

Question

Quizplus · Accepted Answer

The short run aggregate supply curve is upward sloping, meaning that as the price level increases, firms are willing and able to produce more output in the short run. This is due to factors such as sticky wages and prices, which prevent firms from immediately adjusting their costs in response to changes in the price level. Therefore, choice C, "an increasing function of the price level," is the best option.

The Shape of the Short Run Aggregate Supply Curve Is