According to the Misperceptions Theory of the Short-Run Aggregate Supply

question 9

Multiple Choice

According to the misperceptions theory of the short-run aggregate supply curve,if a firm thought that inflation was going to be 4 percent and actual inflation was 2 percent,then the firm would believe that the relative price of what it produces had

• A)increased,so it would increase production.
• B)increased,so it would decrease production.
• C)decreased,so it would increase production.
• D)decreased,so it would decrease production.

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Definitions:

Air Pollution

The presence of substances in the atmosphere that are harmful to the health of humans and other living beings, or cause damage to the climate or to materials.

Miles Driven

The total distance traveled by a vehicle, typically measured in miles.

External Benefit

An advantage or positive effect on a third party or society at large, resulting from an economic transaction or activity, not accounted for in the market price.

Supply And Demand

The economic model that determines the price levels of goods and services based on the relationship between the quantity available and the quantity demanded by consumers.