In the very short run, the level of
A)output is determined by both aggregate demand and aggregate supply
B)output is determined by aggregate demand alone
C)prices will change if aggregate demand shifts
D)prices is determined by aggregate demand alone
E)both A and C

Question

Quizplus · Accepted Answer

In the very short run, prices are fixed and cannot adjust to changes in demand or supply. Therefore, output is determined solely by the level of aggregate demand. This is known as the Keynesian short-run model. In the medium and long run, prices are more flexible and can adjust to changes in aggregate demand and supply, which allows for both to influence the level of output.

In the Very Short Run, the Level of