In the short run, a price increase in the goods and services market will
A) increase the purchasing power of money.
B) improve producer profits and, thereby, induce suppliers to expand output.
C) increase resource prices, lower profits, and lead to a decline in output.
D) reduce the natural rate of unemployment.

Question

Quizplus · Accepted Answer

In the short run, a price increase in the goods and services market will improve producer profits and induce suppliers to expand output because they will be able to sell more goods at a higher price. This is because in the short run, factors of production, such as labor and capital, are fixed, so suppliers will have to increase output to meet the demand at the new higher price.

In the Short Run, a Price Increase in the Goods