Along an aggregate supply curve, if the level of output is less than the natural level of output, then the price level is:
A) greater than the expected price level.
B) less than the expected price level.
C) equal to the natural price level.
D) stuck at the existing price level.

Question

Quizplus · Accepted Answer

When the level of output is less than the natural level of output, there is a decrease in supply which leads to an increase in prices due to a shortage of goods in the market. Therefore, the price level is less than the expected price level.

Along an Aggregate Supply Curve, If the Level of Output