In the short-run, resource costs such as wages and rent are generally:

Prepare for the M43.1 Aggregate Demand and Supply Test with flashcards and multiple choice questions. Each question includes hints and detailed explanations. Enhance your understanding and get exam-ready!

In the short run, resource costs such as wages and rent tend to be fixed or sticky. This means that these costs do not adjust immediately to changes in supply and demand conditions in the economy. For instance, wages often involve contracts that can limit how quickly they can be adjusted in response to market changes, leading to rigidity. Similarly, rent agreements are typically long-term and don't fluctuate with short-term economic changes, reflecting the stickiness in these costs.

As a result, when analyzing the short-run aggregate supply curve, it is important to recognize that these fixed costs can lead to shifts in the supply curve, as producers may not be able to adjust all costs quickly to changes in price levels. This stickiness creates the potential for short-term mismatches between aggregate demand and supply, impacting overall economic output and pricing dynamics.

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