If the actual price level is 165,but people had been expecting it to be 160,then
A)the quantity of output supplied rises,but only in the short run.
B)the quantity of output supplied rises in the short run and the long run.
C)the quantity of output supplied falls,but only in the short run.
D)the quantity of output supplied falls in the short run and the long run.

Question

Quizplus · Accepted Answer

When the actual price level is higher than expected, producers experience higher profits in the short run, leading them to increase production in the short run to take advantage of the unexpectedly high profits. However, in the long run, input prices, such as wages, may adjust to reflect the higher price level, pushing up costs and reducing profitability. As a result, output supplied may not continue to rise in the long run.

If the Actual Price Level Is 165,but People Had Been