An aggregate supply curve represents the relationship between the:

• A. money supply and the rate of inflation
• B. exchange rate and the volume of exports
• C. interest rate and the level of investment spending
• D. overall price level and the total quantity of goods and services produced in an economy

Answer: (D)

Verified step by step guidance

1. Understand that the aggregate supply (AS) curve shows how the total quantity of goods and services produced (real output) in an economy changes in response to changes in the overall price level.
2. Recall that the aggregate supply curve is typically upward sloping in the short run, meaning that as the overall price level increases, producers are willing to supply more goods and services.
3. Recognize that the AS curve does not directly relate to variables like money supply, exchange rates, or interest rates, but rather focuses on the relationship between price level and output.
4. Formally, the aggregate supply function can be expressed as \(\text{AS}: \quad Q_s = f(P)\), where \(Q_s\) is the total quantity supplied and \(P\) is the overall price level.
5. Therefore, the correct interpretation of the aggregate supply curve is the relationship between the overall price level and the total quantity of goods and services produced in the economy.