ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In the short run, workers have perfect information about changes in the price level.
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In the short run, not all people in the economy can fully recognise and adjust correspondingly to changes in economic conditions correspondingly.
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In the long run, there is no way to increase the potential output level of an economy.
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In the long run, an increase in the price level will lead to an increase in the full-employment output level.
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Detailed explanation-1: -The short run in macroeconomics is a period in which wages and some other prices are sticky. The long run is a period in which full wage and price flexibility, and market adjustment, has been achieved, so that the economy is at the natural level of employment and potential output.
Detailed explanation-2: -Which of the following statements makes a correct distinction between the short run and the long run? The term “short run” means that not enough time has passed for input prices to adjust. The term “long run” means that enough time has passed to allow all input prices to adjust fully.
Detailed explanation-3: -"The short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. The long run is a period of time in which the quantities of all inputs can be varied.
Detailed explanation-4: -Short-term production and long-run production both involve the use of input factors. In short-term production, at least one of the factors is fixed. In long-term production none of the factors are factors. Instead, long-term production uses variable variables that can fluctuate or change.