Question

The short-run aggregate supply curve has a ____ slope, showing that increases in the price level will ____ the quantity of aggregate output supplied by firms.

a- positive: increase

b- positive; decrease

c- negative; increase

d- negative; decrease

Answer 1

The short-run aggregate supply curve has a positive slope, showing that increases in the price level will decrease the quantity of aggregate output supplied by firms.

Step-by-step explanation:

The correct answer is b- positive; decrease.

The short-run aggregate supply (SRAS) curve has a positive slope, showing that increases in the price level will decrease the quantity of aggregate output supplied by firms.

When the price level for outputs increases, while the price level of inputs remains fixed, firms have an incentive to produce more to earn higher profits. However, in the short run, there are limits to the amount of additional production firms can achieve, leading to a decrease in the quantity of aggregate output supplied.