The short run in macroeconomics is the period in which
A) prices change significantly.
B) no contracts or agreements exist to fix prices.
C) demand determines output.
D) the demand curve is vertical.

Question

Quizplus · Accepted Answer

In the short run, it is assumed that some factors of production (such as capital) are fixed, and therefore the level of output is determined by demand. Prices may not change significantly in the short run as firms may have some contractual agreements in place, but these do not fix prices completely. The demand curve may also slope downward in the short run, indicating that quantity demanded responds somewhat to changes in price. Therefore, choices A, B, and D are incorrect.

The Short Run in Macroeconomics Is the Period in Which