Question

The short-run aggregate supply curve shows: a. Changes in output in an economy as the price level changes, holding all other determinants of real GDP constant b. What happens to output in an economy when the government spends more money c. The relationship between the price level and aggregate expenditure d. How firms respond to changes in interest rates

Answer 1

The short-run aggregate supply curve shows the relationship between the price level and aggregate expenditure

Explanation:

A short-run aggregate supply curve (SRAS) is a graphical model that shows the positive relationship between aggregate price level and aggregate production amount supplied in an economy. The short-run aggregate supply curve is sloping upward as the supplied quantity increases as the prices increase.

The short-run aggregate supply curve captures the relationship between the actual output and the price level. True production becomes bigger as the price level increases. As the price level decreases, actual production decreases too.