If the price level in the current year is much higher than the expected price level,_____.
A)firms will increase production beyond the economy's potential level
B)the unemployment rate will increase
C)firms will decrease production below the economy's potential level
D)the short-run aggregate supply curve will become steeper
E)the unemployment rate will fall to zero

Question

Quizplus · Accepted Answer

When the price level is higher than expected, firms are incentivized to increase production to take advantage of higher prices, often pushing production beyond the economy's potential level in the short run.

If the Price Level in the Current Year Is Much