If the expected price level exceeds the actual price level,then
A)potential output falls
B)real GDP may fall below potential output
C)potential output increases
D)nominal wages increase
E)the inflation rate accelerates

Question

Quizplus · Accepted Answer

If the expected price level exceeds the actual price level, then real GDP may fall below potential output. This is because firms may be reluctant to produce as much output if they expect prices to fall in the future.

If the Expected Price Level Exceeds the Actual Price Level,then