The slope of the immediate-short-run aggregate supply curve is based on the assumption that:
A) Both input and output prices are fixed
B) Neither input nor output prices are fixed
C) Input prices are flexible but output prices are fixed
D) Input prices are fixed but output prices are flexible

Question

Quizplus · Accepted Answer

The immediate-short-run aggregate supply curve assumes that both input and output prices are fixed in the short run, so any changes in demand will only result in changes in the quantity supplied, not in prices. As a result, the slope of the curve is vertical, indicating that an increase in demand will lead to a proportional increase in output without any change in prices.

The Slope of the Immediate-Short-Run Aggregate Supply Curve Is Based