Attempts Keep the Highest / 1 2. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky wage theory asserts that output prices adjust more quickly to changes in the price level than do wages, in part because of long-term wage contracts. Suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price level of 100. If the actual price level turns out to be 110 (that is, prices in the economy are higher than expected), the firm's output prices will and the wages the firm pays its workers will remain fixed at the contracted level. The firm will respond to the unexpected Increase in the price level by the quantity of output it supplies. If many firms face similarly rigid wage contracts, the unexpected increase in the price level causes the quantity of output supplied to the natural rate of output in the short run.2. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level in the economy deviates rice level. Several theories explain how this might happen. remain the same rise cky wage theory asserts that output prices adjust more quickly to changes in the price level than do wages, in part because of tracts. Suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price fall ctual price level turns out to be 110 (that is, prices in the economy are higher than expected), the firm's output prices will and the wages the firm pays its workers will remain fixed at the contracted level. The firm will respond to the unexpected increase in the price level by the quantity of output it supplies. If many firms face similarly rigid wage contracts, the unexpected increase in the price level causes the quantity of output supplied to the natural rate of output in the short run.2. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky wage theory asserts that output prices adjust more quickly to changes in the price level than do wages, in part because of long-term wage contracts. Su reducing signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price level of 100. If the actual prid out to be 110 (that is, prices in the economy are higher than expected), the firm's output prices will increasing and the firm pays its workers will remain fixed at the contracted level. The firm will respond to the unexpected increase in the price level by the quantity of output it supplies. If many firms face similarly rigid wage contracts, the unexpected increase in the price level causes the quantity of output supplied to the natural rate of output in the short run.2. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural rate of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky wage theory asserts that output prices adjust more quickly to changes in the price level than do wages, in part because of long-term wage contracts. Suppose a firm signs a contract agreeing to pay its workers $15 per hour for the next year, based on an expected price level of 100. If the actual price level turns out to be 110 (that is, pr fall below onomy are higher than expected), the firm's output prices will and the wages the firm pays its workers ed at the contracted level. The firm will respond to the unexpected rise above increase in the price level by the quantity of output f many firms face similarly rigid wage contracts, the unexpected increase in the price level causes the quantity of output supplied to the natural rate of output in the short run