Prices that adjust slowly to their long-run equilibrium ________.
A)help the economy to avoid economic fluctuations
B)call for policies that focus on short-run fluctuations
C)are conducive to maintaining low inflation
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

Prices that adjust slowly to their long-run equilibrium require policies that focus on short-run fluctuations because the economy may experience periods of disequilibrium where prices do not align with supply and demand. Such periods may require government intervention in the form of monetary or fiscal policies to stabilize the economy. Slow adjustment may also lead to higher inflationary pressures, making it difficult to maintain low inflation over the long run.

Prices That Adjust Slowly to Their Long-Run Equilibrium ________