In the aggregate supply relation, the current price level depends in the medium run upon:
A) fiscal policy.
B) business confidence.
C) consumer confidence.
D) monetary policy.
E) the expected price level.

Question

Quizplus · Accepted Answer

According to the aggregate supply relation, the current price level in the medium run depends upon the expected price level. This is because producers will adjust their output and prices based on their expectations of future prices. Thus, if they expect the price level to increase, they will increase their prices as well.

In the Aggregate Supply Relation, the Current Price Level Depends