Which of the Following Best Describes Why the Aggregate Supply

question 73

Multiple Choice

Which of the following best describes why the aggregate supply curve slopes upward?

• A) When actual output exceeds potential, firms struggle to keep production in line with the high demand. Firms therefore raise their prices by more than the usual amount in an attempt to cover increased production costs.
• B) When actual output exceeds potential, firms have an easy time keeping production in line with the high demand. Firms therefore lower their prices by more than the usual amount in an attempt to cover increased production costs.
• C) When actual output exceeds potential, firms struggle to keep production in line with the high demand. Firms therefore lower their prices with decreased production costs.
• D) When actual output falls below potential, firms easily keep production in line with the high demand. Firms therefore raise their prices by more than the usual amount in an attempt to cover increased production costs.
• E) None of these answers are correct.

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Definitions:

Combine

To combine is to join or merge two or more elements into a single unit or group.

Simplify

The process of altering an expression into its most basic form or notation.

Combine

The act of merging elements in various contexts, especially in algebra where terms are added or multiplied.