Question : The aggregate supply curve in the short run is mainly influenced by:
Option 1: Resource prices
Option 2: Technology
Option 3: Government policies
Option 4: Interest rates
Correct Answer:
Resource prices
Solution : The correct answer is (a) resource prices.
In the short run, the aggregate supply curve depicts the relationship between the overall price level and the quantity of goods and services that businesses are willing to supply. Several factors influence short-run aggregate supply, but one of the primary drivers is resource prices.
Resource prices, such as wages, raw material costs, and energy prices, directly affect production costs for businesses. When resource prices increase, the cost of production rises, reducing the profitability of businesses. As a result, businesses may choose to supply a lower quantity of goods and services at each price level, leading to a decrease in short-run aggregate supply.
