Question : In the short run, the aggregate supply curve is:
Option 1: Vertical
Option 2: Horizontal
Option 3: Upward-sloping
Option 4: Downward-sloping
Correct Answer: Upward-sloping
Solution : The correct answer is (c) Upward-sloping.
The upward-sloping aggregate supply curve in the short run indicates that as the overall level of prices in the economy increases, businesses are willing to produce more output. This positive relationship between the price level and the quantity of goods and services supplied is often referred to as the "sticky-wage" or "sticky-price" model.
In the short run, some input prices, such as wages, may be relatively inflexible or fixed, causing firms to have limited ability to adjust their production costs quickly. As a result, when the price level rises, firms can increase their output and profits by utilizing existing resources more intensively or by employing existing labor and capital more fully.
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