At the current level of output, suppose the actual price level is greater than the price level that individuals expect. We know that:
A) any subsequent decrease in the aggregate price level will cause an increase in the real money supply and a rightward shift in the aggregate demand curve.
B) output is currently less than the natural level of output.
C) the interest rate will tend to rise as the economy adjusts to this situation.
D) the AS curve will tend to shift down over time.
E) the nominal wage will tend to decrease as individuals revise their expectations of the price level.
Correct Answer:
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