In your own words, describe what happens when firms and workers underestimate future prices in the economy. Focus your answer on what would happen to actual output as opposed to the expected potential output.
Your response must be at least 500 words in length.
Some of the effects of underestimating future prices in the economy would be;
- Reduced profitability.
- Lower investment and expansion.
- Wage pressures and inflation.
- Potential imbalances in the demand-supply curve.
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