Production is more profitable and employment rises.
The whole supply of products and services produced within an economy at a specific overall price over a specific time period is known as aggregate supply, also known as total output. The relationship between price levels and the amount of output that businesses are prepared to produce is depicted by the aggregate supply curve. Usually, the level of prices and total supply have a positive connection.
Rising prices are often a sign that firms need to increase production to keep up with rising total demand. Consumers battle for the available commodities and pay more when demand rises in the face of steady supply. Due to this dynamic, businesses boost output in an effort to increase sales. Prices normalize as a result of the increased supply, while output stays high.
Therefore, the sticky-wage theory of the short-run aggregate supply curve says that when the price level rises less than expected, production is more profitable and employment rises.
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