Why Might a Rising Price Level in the Short Run

question 143

Multiple Choice

Why might a rising price level in the short run create an incentive for firms to increase production?  

• A) because costs of production will increase 
• B) because total sales revenue will decrease 
• C) because profits will increase 
• D) because costs of production will increase faster than total revenue

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Definitions:

Expansionary Policy

A macroeconomic strategy used by governments or central banks to stimulate the economy by increasing money supply or reducing taxes.

Fiscal Policy

Government strategies to influence economic conditions through spending and taxation decisions to manage economic growth, inflation, and unemployment.

Anticipated Policy

A governmental or organizational policy that is expected to be implemented in the future, often already influencing current behaviors and decisions.

Price Level

A measure of the average prices of goods and services in the economy at a given time.