The short run is a period of time during which:
A)there is an expansionary gap that cannot be corrected using the passive approach.
B)actual output equals potential output.
C)there is a recessionary gap that cannot be corrected through discretionary policy.
D)resource buyers and sellers cannot adjust fully to changes in the price level.
E)resource buyers and sellers can adjust fully to changes in the price level.

Question

Quizplus · Accepted Answer

In the short run, resource buyers and sellers cannot adjust fully to changes in the price level. This is because some contracts and agreements, such as wage contracts and rental agreements, may be fixed in the short run, making it difficult for resource prices to adjust quickly and fully to changes in the price level. This leads to a situation where actual output may not equal potential output, creating a recessionary or inflationary gap that may require discretionary policy intervention to correct.

The Short Run Is a Period of Time During Which