Question

The short-run aggregate supply curve is upsloping because higher price levels lower interest rates and encourage firms to invest and produce more create incentives to expand output when resource prices are unresponsive to price-level changes encourage importation of foreign goods create an expectation among producers of still higher price levels

Answer 1

Answer: Create incentives to expand output when resource prices are unresponsive to price-level changes

Explanation:

High price levels indeed create incentives to expand output if resource prices are unresponsive to price changes.

What this means is that, when price levels rise, suppliers tend to take advantage of this rise by producing more if, their INPUTS DON'T increase in price as well.

For example, price of steel goes up by $5 but the price of Iron Ore remains the same.

Suppliers and Producers will produce more steel because they can make a high profit because iron ore prices have not changed.