Question

Which of the following are reasons that the short-run aggregate supply curve slopes upward?a. As the price level rises, firms decrease their investment, because it is more expensive to purchase capital. b. As the price level rises, firms find it more profitable to hire workers at any given wage. c. As the price level rises, firms expand their production because they can sell their output for more money.

Answer 1

The correct answer is letter "C": As the price level rises, firms expand their production because they can sell their output for more money.

Step-by-step explanation:

In the short-run aggregate supply curve, an increase in price represents an increase in the quantity supplied which is reflected in an upward movement of the supply curve. Under that scenario, companies can invest in their operations since they have more profits as a result of selling their products at a higher price.