If the price level turns out to be higher than expected,
A)businesses increase production
B)the potential output level increases
C)initially,the short-run aggregate supply curve shifts rightward; later,there is an upward movement along that curve
D)initially,the short-run aggregate supply curve shifts rightward; later,there is a downward movement along that curve
E)a contractionary gap develops

Question

Quizplus · Accepted Answer

When the price level is higher than expected, businesses may increase production to take advantage of higher prices, leading to an upward movement along the short-run aggregate supply curve.

If the Price Level Turns Out to Be Higher Than