When prices in the goods and services market are below the level anticipated,
A) output will temporarily exceed the economy's long-run potential.
B) output will temporarily fall short of the economy's long-run potential.
C) output will be equal to the economy's long-run potential.
D) the actual rate of unemployment will be less than the natural rate of unemployment.

Question

Quizplus · Accepted Answer

If prices in the goods and services market are below the level anticipated, it indicates that there is an excess supply of goods and services in the market. This will lead to a fall in output and production, which will cause output to temporarily fall short of the economy's long-run potential. This will happen until the excess supply is exhausted and equilibrium is reestablished in the market.

When Prices in the Goods and Services Market Are Below