Suppose the actual and expected price levels in an economy are initially equal.However,the actual price level becomes higher due to some change in economic conditions.Which of the following will occur eventually?
A)The economy will move rightward along the short-run aggregate supply curve.
B)The economy will move leftward along the short-run aggregate supply curve.
C)The short-run aggregate supply curve will shift to the right.
D)The short-run aggregate supply curve will shift to the left.
E)The short-run aggregate supply curve will become flatter.

Question

Quizplus · Accepted Answer

When the actual price level is higher than expected, firms face higher costs and may reduce output, leading to a leftward shift of the short-run aggregate supply curve.

Suppose the Actual and Expected Price Levels in an Economy