If the price level in the current period is lower than what buyers and sellers anticipated,
A) profit margins will be unattractive, and firms will expand output.
B) profit margins will be unattractive, and firms will reduce output.
C) profit margins will be attractive, and firms will expand output.
D) profit margins will be attractive, and firms will reduce output.

Question

Quizplus · Accepted Answer

If the price level is lower than anticipated, firms will face lower revenues than expected, leading to unattractive profit margins, prompting them to reduce output.

If the Price Level in the Current Period Is Lower