Select all correct statements below.Note: This is a multiple-answer question; thus, more than one option may be correct.a.To model economic development, we assume sticky prices.b.We assume prices are flexible in the long run.c.In the short run, prices adjust to ensure market clearing.d.To model fluctuations in output, we assume sticky prices
Question
Select all correct statements below.Note: This is a multiple-answer question; thus, more than one option may be correct.a.To model economic development, we assume sticky prices.b.We assume prices are flexible in the long run.c.In the short run, prices adjust to ensure market clearing.d.To model fluctuations in output, we assume sticky prices
Solution
The correct statements are:
b. We assume prices are flexible in the long run. d. To model fluctuations in output, we assume sticky prices.
Explanation:
a. To model economic development, we do not necessarily assume sticky prices. Economic development models often focus on factors like capital accumulation, technological progress, and population growth.
c. In the short run, prices do not always adjust to ensure market clearing. This is especially true in the presence of sticky prices, which are prices that do not adjust immediately to changes in economic conditions.
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.
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