According to the misperceptions theory,when the aggregate price level is higher than expected,
A)the aggregate quantity of output supplied rises above the full-employment level.
B)the aggregate quantity of output supplied falls below the full-employment level.
C)the aggregate quantity of output demanded falls below the full-employment level.
D)the aggregate quantity of output demanded rises above the full-employment level.

Question

Quizplus · Accepted Answer

When the aggregate price level is higher than expected, producers believe the price of their individual product has increased relative to others, leading them to increase production, thus raising the aggregate quantity of output supplied above the full-employment level.

According to the Misperceptions Theory,when the Aggregate Price Level Is