Discuss whty the short un aggregate supply curve has a posit

Discuss whty the short un aggregate supply curve has a positive slope and the long run supply curve a vertical line

Solution

The short-run aggregate supply curve has a positive slope because in the short run the firms can increase the aggregate supply with an increase in the price. At a higher nominal price, the real wages fall and the firm can hire more and increase their production, making the supply curve slope upward.

In the long run, price doesn\'t matter but supply depends on the real factors like technology, population, and capital stock etc. this makes the supply curve perfectly inelastic i.e. a vertical line.