Question

The short-run aggregate supply curve slopes upward because a _____ aggregate price level leads to _____. a. lower; higher output, since production costs tend to fall in the short run higher; b. higher output, since most production costs are fixed in the short run lower; c. higher profit and higher productivity higher; d. lower output as costs of production increase

Answer 1

Answer:

The correct answer is letter "C"

Explanation:

The short-run supply curve slopes upward because higher prices lead to greater production, while lower prices diminish production. In economics, aggregate supply is the total supply of goods and services that firms in a national economy plan to sell during a specific time period. It is the total amount of goods and services that the firms are willing to sell at a given price level in the economy. Aggregate supply is the relationship between the price level and the production of the economy. The short-run aggregate supply curve is upward sloping because the quantity supplied increases when the price rises. In the short-run, firms have one fixed factor of production (usually capital ). When the curve shifts outward the output and real GDP increase at a given price. As a result, there is a positive correlation between the price level and output, which is shown on the short-run aggregate supply curve.