The higher-than-expected price level causes firms to earn â—» profit than they expected on each unit of output they produce, and, therefore, they â—» their production level. At the same time, the real value of wages and other resource prices is â—» than workers and firms expected when they signed long-term contracts. As a result, the economy as a whole produces at a level â—» its full-employment output, and the unemployment rate is q, than its natural rate.