If the price level in the current period is higher 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

When the price level is higher than anticipated, firms can sell their products at higher prices, leading to attractive profit margins. This incentivizes firms to expand output to maximize profits.

If the Price Level in the Current Period Is Higher