To study macroeconomics, one needs various models with different assumptions about the flexibility and/or stickiness of price levels.This is because:
A)the economy behaves similarly to demand shocks regardless of the length of time.
B)the price flexibility is a short-run phenomenon while, the price stickiness is a long-run phenomenon.
C)the economy behaves so differently depending on how much time has passed after a demand shock.
D)various government policies are useless to eliminate the effects of an unexpected demand shock.

Question

Quizplus · Accepted Answer

The economy's response to demand shocks varies over time; in the short run, prices may be sticky, while in the long run, they become more flexible, affecting economic behavior differently.

To Study Macroeconomics, One Needs Various Models with Different Assumptions