An increase in the price level is likely to increase the aggregate amount of output supplied in the short run because
A) interest rate is high in the short-run.
B) wages are sticky in the short-run.
C) wages change in the short-run.
D) the aggregate supply curve is vertical in the short-run.

Question

Quizplus · Accepted Answer

An increase in the price level is likely to increase the aggregate amount of output supplied in the short run because wages are sticky in the short-run. This means that when prices increase, it takes time for wages to adjust, allowing firms to temporarily increase production and profits due to lower real wages.

An Increase in the Price Level Is Likely to Increase