One difference between the short run and the long run in macroeconomics is that
A) aggregate supply defines GDP in the short run, whereas aggregate demand, given a price, defines GDP in the long run.
B) prices that can be assumed exogenous in the long run tend to vary wildly in the short run.
C) aggregate demand defines GDP given an exogenous price level in the short run, whereas aggregate supply defines GDP in the long run with flexible prices.
D) people can form expectations about what will happen over the long run but are completely in the dark about the random walk uncertainties of the short run.
E) none of the above.

Question

Quizplus · Accepted Answer

In the short run, GDP is determined by aggregate demand at a given price level because prices are sticky and do not adjust immediately. In the long run, prices are flexible, allowing aggregate supply to determine GDP as it adjusts to meet the aggregate demand at new price levels.

One Difference Between the Short Run and the Long Run