Suppose the price level turns out to be higher than expected in the short run.Which of the following actions will businesses take?
A) Businesses will increase production.
B) Businesses will decrease production.
C) Initially, the short-run aggregate supply curve will shift rightward, but later an upward movement will occur along that curve.
D) Initially, the short-run aggregate supply curve will shift rightward, but later a downward movement will occur along that curve.

Question

Suppose the price level turns out to be higher than expected in the short run.Which of the following actions will businesses take?  
A) Businesses will increase production. 
B) Businesses will decrease production. 
C) Initially, the short-run aggregate supply curve will shift rightward, but later an upward movement will occur along that curve. 
D) Initially, the short-run aggregate supply curve will shift rightward, but later a downward movement will occur along that curve.

Quizplus · Accepted Answer

When the price level is higher than expected, businesses typically respond by increasing production to take advantage of higher prices and potentially higher profits.

Suppose the Price Level Turns Out to Be Higher Than