In the short-run, if the price level is greater than the expected price level, then in the long run the aggregate:
A) demand curve will shift leftward.
B) demand curve will shift rightward.
C) supply curve will shift upward.
D) supply curve will shift downward.

Question

Quizplus · Accepted Answer

In the long run, if the actual price level is greater than the expected price level, firms adjust their expectations upwards. This leads to higher wage demands and other costs, which shifts the long-run aggregate supply curve upward (or to the left), reflecting higher production costs.

In the Short-Run, If the Price Level Is Greater Than