Suppose the Actual Price Level Exceeds the Expected Price Level

question 144

Multiple Choice

Suppose the actual price level exceeds the expected price level reflected in long-term contracts.How will firms respond?  

• A) Firms will find production more profitable than they had expected, and will increase the quantity of output supplied. 
• B) Firms will find production less profitable than they had expected, and will decrease the quantity of output supplied. 
• C) Firms will find production more profitable than they had expected, and will decrease the quantity of output supplied. 
• D) Firms will find production less profitable than they had expected, and will increase the quantity of output supplied.

Describe the three ranges of the aggregate supply curve and their economic implications.

Compare and contrast Keynesian and Classical theories of employment.

Explain the wealth effect and its impact on the economy.

Understand the effects of savings and investment on interest rates and the economy according to Classical theory.

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Definitions:

Alternative Arguments

Differing or opposing viewpoints presented in a discussion or debate to consider various perspectives.

Multiple Intelligences

A theory proposing that individuals possess a variety of distinct types of intelligence, each relating to a specific domain of human capability.

Mental Effort

The amount of cognitive resources required to accomplish a task, ranging from low to high depending on the complexity and demands of the task.

Spatial Intelligence

The ability to visualize with the mind’s eye, relating to the capacity to think about objects in three dimensions.