The short-run aggregate supply curve shows the relationship between:

• A. the price level and the quantity of goods and services firms are willing to produce in the short run
• B. the interest rate and the quantity of money supplied in the economy
• C. the unemployment rate and the level of government spending
• D. the price level and the quantity of goods and services demanded by households

Answer: (A)

Verified step by step guidance

1. Step 1: Understand what the short-run aggregate supply (SRAS) curve represents in macroeconomics. It shows how much output firms are willing to produce at different price levels in the short run, holding other factors constant.
2. Step 2: Recall that the SRAS curve relates the price level to the quantity of goods and services supplied by firms, not demanded by households or related to interest rates or government spending.
3. Step 3: Eliminate options that do not describe a relationship involving the price level and quantity supplied, such as the interest rate and money supply, unemployment and government spending, or price level and quantity demanded.
4. Step 4: Confirm that the correct relationship depicted by the SRAS curve is between the price level and the quantity of goods and services firms are willing to produce in the short run.
5. Step 5: Summarize that the SRAS curve slopes upward because as the price level rises, firms are generally willing to supply more output due to higher potential profits.