The short-run model is built on which of the following?
i. The economy is constantly being hit by so-called shocks.
ii. Economic policy has no impact on output.
iii. There is trade-off between output and inflation.
A) i only
B) i and iii
C) ii and iii
D) ii only
E) i, ii, and iii

Question

Quizplus · Accepted Answer

The short-run model is built on the assumption that the economy is constantly being hit by so-called shocks (i) and there is a trade-off between output and inflation (iii). However, it does not assume that economic policy has no impact on output (ii). Therefore, the best choice is B.

The Short-Run Model Is Built on Which of the Following