In the economic fluctuations model, the so-called short run normally refers to
A)the first couple of days after a shock to aggregate demand.
B)the first month after a shock to aggregate demand.
C)the initial departure of real GDP from potential GDP after a shock to aggregate demand.
D)the time it takes for a full recovery to take place after a shock to aggregate demand.
E)None of these

Question

Quizplus · Accepted Answer

In the economic fluctuations model, the short run is typically defined as the period of time when the economy's actual output deviates from its potential output after a shock to aggregate demand. This deviation may take place over several quarters or even years, and is the focus of many macroeconomic theories and policies such as monetary and fiscal policy. Options A and B are too short a time period to capture this deviation, and option D assumes a full recovery takes place, which is not always the case. Therefore, option C is the best choice.

In the Economic Fluctuations Model, the So-Called Short Run Normally