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

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.