The Short-Run Aggregate Supply Curve Is Upward-Sloping Because

question 20

Multiple Choice

The short-run aggregate supply curve is upward-sloping because:

• A)higher prices discourage the producers to expand output.
• B)higher price levels create incentives to expand output when resource prices remain constant.
• C)lower prices encourage the producers to expand output.
• D)higher price levels create an expectation among producers of still higher price levels.

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Definitions:

Good

An item or service that is produced for sale or use.

Income Effect

Alterations in the financial state of individuals or economies and how these changes drive the demand for various goods or services.

Consumer's Spending

The total amount of money spent by households in an economy on goods and services.

Budget Constraint

The limit on the consumption bundles that a consumer can afford given their income and the prices of goods and services.