The aggregate supply curve is upward sloping in the short-run because of the Profit effect which says the rate of output will increase as the price level increases.Profit effect which says higher input costs will cause an increase in the rate of output.Cost effect which says the rate of output will increase if production costs increase.Cost effect which says higher input costs will cause an increase in the rate of inputs.Inflation effect which says that everything costs more because U.S. debt is so large.

Answered: The aggregate supply curve is upward…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter26: Monetary Policy

Section26.A: Policy Disputes Using The Self Correcting Aggregate Demand And Supply Model

Problem 14SQ

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The aggregate supply curve is upward sloping in the short-run because of the

Profit effect which says the rate of output will increase as the price level increases.
Profit effect which says higher input costs will cause an increase in the rate of output.
Cost effect which says the rate of output will increase if production costs increase.
Cost effect which says higher input costs will cause an increase in the rate of inputs.
Inflation effect which says that everything costs more because U.S. debt is so large.

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