In the short run, a decrease in the price level:
A)decreases output prices relative to input prices.
B)increases the profit margins of many producers.
C)decreases RGDP supplied.
D)both (a) and (c)

Question

In the short run, a decrease in the price level:
A)​decreases output prices relative to input prices.
B)​increases the profit margins of many producers.
C)​decreases RGDP supplied.
D)​both (a) and (c)

Quizplus · Accepted Answer

A decrease in the price level in the short run decreases both output prices relative to input prices (a) and RGDP supplied (c). This is because firms are not able to fully adjust their input prices in the short run, resulting in lower profit margins for many producers (b) and a decrease in RGDP supplied.

In the Short Run, a Decrease in the Price Level