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

question 67

Multiple Choice

According to the misperceptions theory of the short-run aggregate supply curve,if the price level increases more than people expect,how do firms change their behaviour?

• A) They believe that the relative price has decreased,so they increase production.
• B) They believe that the relative price has decreased,so they decrease production.
• C) They believe that the relative price has increased,so they increase production.
• D) They believe that the relative price has increased,so they decrease production.