If the price level in the current year is much higher than the expected price level in an economy, _____
A) firms will increase production beyond the economy's potential level.
B) the natural rate of 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 actual price level is higher than expected, firms are incentivized to increase production beyond the economy's potential level to take advantage of higher prices and profits.

If the Price Level in the Current Year Is Much