Given implicit or explicit resource price agreements,if the actual price level is below the expected price level,the:
A)economy will move rightward along the short-run aggregate supply curve.
B)economy will move leftward along the short-run aggregate supply curve.
C)short-run aggregate supply curve will shift to the left.
D)long-run aggregate supply curve will become steeper.
E)short-run aggregate supply curve will become flatter.

Question

Quizplus · Accepted Answer

If the actual price level is below the expected price level, firms will reduce their production as they would be making lower profits than expected. This will cause a leftward shift along the short-run aggregate supply curve, resulting in a decrease in output and employment.

Given Implicit or Explicit Resource Price Agreements,if the Actual Price