Within the framework of the AD/AS model, when the current price level in the goods and services market is above the level anticipated at the time decision makers agreed to long-term resource contracts,
A) producer profits will fall, leading to a reduction in output.
B) the natural rate of unemployment will rise.
C) the actual rate of unemployment will fall below the natural rate of unemployment.
D) output will be temporarily below the economy's long-run sustainable output.

Question

Quizplus · Accepted Answer

When the price level is higher than anticipated, firms experience higher profits, leading to increased production and employment, causing the actual unemployment rate to fall below the natural rate.

Within the Framework of the AD/AS Model, When the Current