An assumption of _____ is more plausible for studying the short-run behaviour of the economy, while an assumption of _____ is more plausible for studying the long-run equilibrium behaviour of the economy.
A)deflation; inflation
B)inflation; deflation
C)flexible prices; sticky prices
D)sticky prices; flexible prices

Question

Quizplus · Accepted Answer

In the short run, prices are often sticky, meaning they do not adjust immediately to changes in economic conditions. In the long run, prices are flexible and can adjust to reflect changes in supply and demand, leading to equilibrium.

An Assumption of _____ Is More Plausible for Studying the Short-Run