Given implicit or explicit resource price agreements, if the actual price level is below the expected price level in an economy, the _____
A) economy will move upward along the short-run aggregate supply curve.
B) economy will move downward 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' revenues will decrease, leading them to reduce production, which will cause a shift down along the short-run aggregate supply curve. Therefore, the correct answer is B.

Given Implicit or Explicit Resource Price Agreements, If the Actual