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 short run.b.To model economic development, we assume flexible prices.c.In the long run, prices adjust to ensure market clearing.d.To model fluctuations in output, we assume flexible prices.
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 short run.b.To model economic development, we assume flexible prices.c.In the long run, prices adjust to ensure market clearing.d.To model fluctuations in output, we assume flexible prices.
Solution
The correct statements are:
b. To model economic development, we assume flexible prices. c. In the long run, prices adjust to ensure market clearing.
Explanation:
a. This statement is incorrect because in the short run, prices are often sticky due to factors like menu costs, contracts, and coordination problems.
d. This statement is incorrect because to model fluctuations in output, we often assume sticky prices. This is because in the short run, prices don't always adjust quickly to changes in the economy.
Similar Questions
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.
What are the characteristics of the flexible prices?This is a multi answer question. You can select one or more options as the answer.A.Flexible prices reflect long-run behaviourB.Macroeconomists use price flexibility to study long-run issuesC.In the short run, many prices are sticky,markets always clear.D.In the long run, prices are flexible.
Neoclassical economic models assume that prices and wages are flexible in the long run.Question 24Answera.Trueb.False
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
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.
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