If the actual price level is higher than the expected price level,the economy will:
A)have no structural unemployment.
B)experience a recession.
C)experience stagflation.
D)expand output in the short run.
E)have no seasonal unemployment.

Question

Quizplus · Accepted Answer

When the actual price level exceeds the expected price level, firms experience higher profits than they anticipated in the short run. This encourages firms to increase output to take advantage of the higher profits, leading to an expansion of output in the short run.

If the Actual Price Level Is Higher Than the Expected