Recall the Application about the behavior of prices in retail catalogs to answer the following question(s). Economist Anil Kashyap of the University of Chicago examined the prices of 12 selected goods from L.L. Bean, REI, and The Orvis Company, Inc. Kashyap tracked the prices from the companies' catalogs which were reissued every six months.
-According to this Application, the prices which were tracked in the retail catalogs exemplified the macroeconomic concept of the short run, a period of time in which
A) price changes are significant because the aggregate supply curve is vertical.
B) prices never change because the aggregate demand curve is vertical.
C) prices change frequently because of changes in aggregate supply.
D) prices don't change very much, implying that the aggregate supply curve is relatively flat.

Question

Quizplus · Accepted Answer

In the short run, prices tend to be sticky or don't change very much, which is consistent with the idea that the aggregate supply curve is relatively flat during this period. This allows for changes in aggregate demand to have a larger effect on output than on prices.

Recall the Application About the Behavior of Prices in Retail