In economics, the short-run aggregate supply curve (SRAS) describes the relationship between the average price level and the quantity of output that firms are willing to supply. According to economic theory:
- In the short run, as the average price level increases, firms will generally increase the quantity of output they supply. This is because higher prices can make production more profitable, especially when costs (such as wages and raw materials) adjust more slowly than prices.
- As the average price level decreases, the quantity of output firms are willing to supply typically decreases. This occurs because lower prices can lead to reduced revenue and profits, prompting companies to cut back on production.
This relationship, where the average price level and the quantity of output move in the same direction, is known as a positive relationship.
Therefore, the correct answer to this question is:
C. positive
