If resource suppliers and demanders find out that their price expectations were wrong,they will take corrective actions that will
A)cause the economy to move away from the potential output level
B)raise the unemployment level above the natural rate of unemployment
C)shift the aggregate demand curve
D)shift the short-run aggregate supply curve
E)raise the actual price level

Question

Quizplus · Accepted Answer

If resource suppliers and demanders find out that their price expectations were wrong, they will adjust their production and consumption behavior, causing a shift in the short-run aggregate supply curve. This, in turn, will affect the equilibrium level of output and prices in the economy. Thus, the correct answer is D - shift the short-run aggregate supply curve. The other options are incorrect because they either do not reflect the correct mechanism of adjustment or are unrelated to the issue of price expectations.

If Resource Suppliers and Demanders Find Out That Their Price