Select all correct statements below.Note: This is a multiple-answer question; thus, more than one option may be correct.a.We assume prices are flexible in the long run.b.To model fluctuations in output, we assume sticky prices.c.To model economic development, we assume sticky prices.d.In the short run, prices adjust to ensure market clearing.
Question
Select all correct statements below.Note: This is a multiple-answer question; thus, more than one option may be correct.a.We assume prices are flexible in the long run.b.To model fluctuations in output, we assume sticky prices.c.To model economic development, we assume sticky prices.d.In the short run, prices adjust to ensure market clearing.
Solution
The correct statements are:
a. We assume prices are flexible in the long run. b. To model fluctuations in output, we assume sticky prices.
Explanation:
a. In the long run, prices are assumed to be flexible. This means that they can adjust in response to changes in supply and demand.
b. Sticky prices are used to model fluctuations in output. This is because in the short run, prices do not always adjust immediately to changes in the economy.
c. To model economic development, we do not necessarily assume sticky prices. Economic development is a broad concept that involves many factors, not just price levels.
d. In the short run, prices do not always adjust to ensure market clearing. This is why we assume sticky prices in the short run.
Similar Questions
QUESTION 1Select all correct statements below.Note: This is a multiple-answer question; thus, more than one option may be correct. a. To model fluctuations in output, we assume flexible prices. b. We assume prices are flexible in the short run. c. To model economic development, we assume flexible prices. d. In the long run, prices adjust to ensure market clearing.
Assume that the typical firm in a perfectly competitive market is making economic profit. Which of the following sequence of events best describes the change in prices and output that will occur over the long run as a result of free entry?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aThe short-run market supply curve shifts to the right, causing prices to fall; aggregate (total) industry output increases.bThe market demand curve shifts to the right, causing prices to rise; aggregate market output increases.cThe market demand curve shifts to the left, causing prices to fall; aggregate market output decreases.dThe short-run market supply curve shifts to the left, causing prices to rise; aggregate market output decreases.
48.Keynesian economists believe that in the short run, changes in aggregate demand can lead to fluctuations in: A. Long-run economic growth B. Potential output C. Inflation only D. Unemployment and output levels
Sticky prices and wages that require time for the economy to reach a new equilibrium is a characteristic of New economics, whereas rapid adjustments is a characteristic of New economics.
Explain why, in the long run, a change in prices has no impact on output. What impactdoes aggregate demand have in determining output in the long run?
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