If the general level of prices is higher than business decision makers anticipated when they entered into long-term contracts for raw materials and other resources, which of the following is most likely to occur?
A) a recession
B) output less than the economy's long-run potential
C) a sharp reduction in imports
D) an unemployment rate that is less than the economy's natural rate of unemployment

Question

Quizplus · Accepted Answer

When prices are higher than anticipated, businesses may experience higher profits, leading to increased production and hiring, thus reducing unemployment below the natural rate.

If the General Level of Prices Is Higher Than Business