As the level of real GDP increases, the short-run aggregate supply curve:
A)shifts to the right.
B)shifts to the left.
C)becomes flatter.
D)becomes steeper.
E)becomes horizontal to the real GDP axis.

Question

Quizplus · Accepted Answer

As the level of real GDP increases, the short-run aggregate supply curve becomes steeper. This is because at higher levels of output, the economy is likely to experience diminishing returns to inputs, such as labor and capital, leading to higher marginal costs of production. As a result, producers require higher prices to produce each additional unit of output, leading to a steeper aggregate supply curve.

As the Level of Real GDP Increases, the Short-Run Aggregate