In the short run ________.
A)the more flexible wages and prices are,the more inflation responds to the output gap
B)the more sticky wages and prices are,the more difficult to tell the difference between the short run and long run aggregate supply curves
C)if wages and prices are sticky,aggregate output is always at its potential level
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

In the short run, when wages and prices are flexible, inflation can quickly adjust in response to changes in the output gap, which is the difference between actual and potential output.

In the Short Run ________