If prices of goods and services are inflexible, then:
A) A negative demand shock would lead to increased real GDP in the short run
B) A positive demand shock would lead to increased real GDP in the short run
C) A negative demand shock would have no short-run effect on real GDP
D) There would be no short-run demand shocks

Question

Quizplus · Accepted Answer

Inflexible prices mean that prices do not adjust quickly to changes in demand. Therefore, a positive demand shock would lead to increased real GDP in the short run because the higher demand would result in increased production to meet the demand, as prices remain constant.

If Prices of Goods and Services Are Inflexible, Then