Why will business firms lay off workers if the actual inflation rate ends up being lower than was expected?
A) Firms will not trust employees who made mistakes in anticipating inflation, so they will be fired.
B) The prices of the firm's products will be higher than expected, which creates imbalance.
C) The firm's investments will become burdensome as interest rates drop.
D) Firms will have a hard time paying high wages that were negotiated on expectations of higher prices.

Question

Quizplus · Accepted Answer

If the actual inflation rate is lower than expected, firms may struggle to pay the higher wages that were negotiated based on the expectation of higher inflation, leading to potential layoffs to cut costs.

Why Will Business Firms Lay Off Workers If the Actual