Which of the following is a defining characteristic 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)factor prices are assumed to be constant
D)firms cannot operate near their normal capacity
E)the level of potential output fluctuates with the price level

Question

Quizplus · Accepted Answer

In the AD/AS macro model in the short run, factor prices are assumed to be constant, while in the long run they are allowed to adjust to changes in demand and supply. This is a defining characteristic of the short run in the model. The other options are not necessarily defining characteristics of the short run in the model.

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