Suppose Firms Are Continually Surprised by Higher-Than-Expected Price Levels

question 153

Multiple Choice

Suppose firms are continually surprised by higher-than-expected price levels.Which of the following might be true?

• A)the consumer price index will rise
• B)potential output will increase
• C)potential output will decrease
• D)actual output will be less than potential output in the long run
• E)actual output will exceed potential output in the short run

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Definitions:

Financial Advantage

The benefit or edge that a business or individual has that allows them to generate more income or wealth compared to others.

Fixed Manufacturing Overhead

Regular, consistent expenses that do not vary with production levels, such as salaries of supervisors and rent for factory facilities.

Financial Advantage

The benefit obtained from making specific financial decisions or investments, often measured in terms of profit, savings, or a more favorable financial position.

Variable Costs

Expenses that change in proportion to the business activity level.