Which of the following is a defining assumption of the AD/AS macro model in the short run?
A)factor supplies are assumed to be flexible
B)technology used in production is endogenous and variable
C)the level of potential output fluctuates with the price level
D)factor prices are assumed to be exogenous
E)firms cannot operate near their normal capacity

Question

Quizplus · Accepted Answer

In the short run, the AD/AS model assumes that factor prices, such as wages, are exogenous and do not adjust immediately to changes in the economy.

Which of the Following Is a Defining Assumption of the AD/AS