In the short run, an increase in the price level:
A)decreases output prices relative to input prices.
B)decreases the profit margins of many producers.
C)decreases real GDP supplied.
D)increases aggregate supply.
E)increases output prices relative to input prices.

Question

Quizplus · Accepted Answer

An increase in the price level typically increases output prices relative to input prices because input prices (such as wages and raw materials) often adjust more slowly than output prices. This can temporarily increase profit margins for producers, encouraging them to increase the quantity of goods and services supplied.

In the Short Run, an Increase in the Price Level