You are likely to think that the relative price of your good has declined and you should decrease your output if
A)you expected inflation of 10% and the price of your good rose 7%.
B)you expected inflation of 10% and the price of your good rose 10%.
C)you expected inflation of 10% and the price of your good rose 13%.
D)you expected inflation of 0% and the price of your good rose 10%.

Question

Quizplus · Accepted Answer

If you expected inflation of 10% and the price of your good rose only 7%, the relative price of your good has effectively declined because it did not keep up with the expected inflation rate.

You Are Likely to Think That the Relative Price of Your