The initial response of real GDP to a change in aggregate spending is referred to as
A)a depression.
B)a boom.
C)a recession.
D)the short run.
E)a recovery.

Question

Quizplus · Accepted Answer

The initial response of real GDP to a change in aggregate spending is referred to as the short run. This is because in the short run, prices and wages are sticky and do not fully adjust to changes in aggregate spending, resulting in a temporary change in real GDP. This is in contrast to the long run, where prices and wages have fully adjusted and real GDP returns to its potential level. The other answer choices are not appropriate as they refer to broader economic conditions over a longer period of time.

The Initial Response of Real GDP to a Change in Aggregate