Suppose the economy is operating at a point where output is less than the natural level of output. Which of the following statements is correct given this information?
A) The employment rate is greater than the natural employment rate.
B) The price level will be higher next period than this period.
C) The price level is less than the expected price level.
D) Workers will revise upwards price expectations.
E) The unemployment rate is less than the natural unemployment rate.

Question

Quizplus · Accepted Answer

When output is less than the natural level, the price level is typically lower than expected because demand is weak, leading to lower-than-expected inflation or deflation.

Suppose the Economy Is Operating at a Point Where Output