The short-run aggregate supply curve is more useful than the curves for other time horizons because real-world economies must change price levels before they change output levels.
Option D. must change price levels before they change output levels.
This is because capital, including assets such as buildings and machinery, takes time to turn over. Wages are assumed to be constant in the short run, so an increase in labor leads only to an increase in quantity, not an increase in price. Therefore, the SRAS curve is almost horizontal at this stage.
The short-run aggregate supply curve (SRAS) gives us an idea of how all firms in the economy react to price stability. When prices stagnate, the SRAS curve slopes. The SRAS curve shows that the higher the price level, the higher the output.
The short-run aggregate supply curve is more useful than the curves for other time horizons because real-world economies ______.
Multiple choice question.
typically change price levels and output levels simultaneously
seldom change output levels or price levels
must change output levels before they change price levels
must change price levels before they change output levels
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