In the extended analysis of aggregate supply, the short-run aggregate supply curve is

Multiple Choice
vertical and the long-run aggregate supply curve is horizontal.
horizontal and the long-run aggregate supply curve is vertical.
upward sloping and the long-run aggregate supply curve is vertical.
horizontal and the long-run aggregate supply curve is upward sloping.

1 answer

The correct answer is: upward sloping and the long-run aggregate supply curve is vertical.

In the short run, the aggregate supply curve is typically upward sloping due to factors such as sticky prices and wages, leading to a positive relationship between the price level and the quantity of goods and services supplied. In the long run, however, it is assumed that prices and wages are flexible, and the aggregate supply curve is vertical at the potential output level, which represents the economy's maximum sustainable output given the available resources and technology.