The short-run aggregate supply curve is upward sloping because higher price levels

Question

Multiple Choice
lower interest rates and encourage firms to invest and produce more.
create incentives to expand output when resource prices are unresponsive to price-level changes.
encourage importation of foreign goods.
create an expectation among producers of still higher price levels.

Answer 1

The correct answer is:

create incentives to expand output when resource prices are unresponsive to price-level changes.

This is because in the short run, as the price level increases, firms can sell their goods for higher prices while their input costs remain relatively constant, thus incentivizing them to increase production.