Consider a coffee shop that has two inputs, labor wages and coffee supplies. The coffee shop has a contract with its coffee supplier for 5 years that fixes the price of coffee for the length of the contract. Labor wages are more flexible. Deflation hits the economy. The effect will be a(n) increase in profits for the coffee shop. This example illustrates why the AD curve is upward sloping . Answer 1: increase in profits Answer 2: AD Answer 3: upward sloping