When economists state that in the long run prices are flexible they mean that
A)inflation must be zero in the long run.
B)in the long run, firms adjust their prices to reflect changes in cost or demand.
C)changes in the nominal money supply have greater impact on the level of economic activity in the long run than in the short run.
D)a one-time increase in the money supply will affect output only in the long run.

Question

Quizplus · Accepted Answer

When economists state that in the long run prices are flexible, they mean that firms will adjust their prices to reflect changes in cost or demand over time. This is because in the long run, firms have more flexibility to make adjustments to their production and pricing strategies. In contrast, in the short run, prices may be less flexible due to factors such as contracts, sticky wages, or limited capacity.

When Economists State That in the Long Run Prices Are