The short-run aggregate supply curve is:
A) Vertical at all levels of output.
B) Horizontal at all levels of output.
C) Downward sloping to the right.
D) Upward sloping to the right.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve is upward sloping to the right, meaning that as the price level increases, firms are willing to increase their production and supply more output. This is because they can earn higher profits by selling their goods and services at a higher price level. However, in the long-run, the aggregate supply curve becomes vertical, as all factors of production are assumed to be variable and firms cannot continue to increase production indefinitely without facing higher costs.

The Short-Run Aggregate Supply Curve Is