ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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wages and other costs of production respond immediately to changes in prices
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profit is lower when prices increase, so output decreases
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workers are willing to work for lower wages rather than be laid off
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higher prices lead to higher profit and higher output
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Detailed explanation-1: -The short-run aggregate supply curve is upward sloping because the quantity supplied increases when the price rises. In the short-run, firms have one fixed factor of production (usually capital ). When the curve shifts outward the output and real GDP increase at a given price.
Detailed explanation-2: -It slopes upward because wages and other costs are sticky in the short run, so higher prices mean more profits (prices minus costs), which means a higher quantity supplied.
Detailed explanation-3: -If the aggregate supply-also referred to as the short-run aggregate supply or SRAS-curve shifts to the right, then a greater quantity of real GDP is produced at every price level. If the aggregate supply curve shifts to the left, then a lower quantity of real GDP is produced at every price level.
Detailed explanation-4: -The short-run aggregate supply curve is an upward-sloping curve that shows the quantity of total output that will be produced at each price level in the short run. Wage and price stickiness account for the short-run aggregate supply curve’s upward slope.