Suppose the Actual Price Level Is Less Than the Expected

question 101

Multiple Choice

Suppose the actual price level is less than the expected price level reflected in long-term contracts.How will profits and output be affected, all things equal?  

• 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, because they are making less profit than they had expected, will increase the quantity of output supplied. 
• D) Resource owners, because they are making a lower profit than they had expected, will decrease the quantity of output supplied.

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Definitions:

Reflexes

Automatic, involuntary responses to specific stimuli that are designed to protect the body or facilitate survival.

Spinal Column

The structural backbone of vertebrates, consisting of a series of bones or vertebrae that protect the spinal cord.

Neurons

Neurons are the basic working units of the brain and nervous system, responsible for receiving sensory input from the external world, sending motor commands to our muscles, and transforming and relaying the electrical signals at every step in between.

Hormones

Chemical messengers produced by the endocrine glands that regulate various bodily functions and behaviors.