The short-run and long-run models used to analyze the dynamic behavior of the economy are
A) identical in all respects.
B) different in terms of their treatment of the labor market.
C) merged by price adjustment in the medium run.
D) equally well suited to analyzing growth issues.
E) b and c.

Question

Quizplus · Accepted Answer

The short-run and long-run models differ primarily in how they treat variables such as prices, wages, and expectations. In the short run, some prices (like wages) are sticky, leading to different outcomes than in the long run where prices are more flexible. The medium run is often considered a transition phase where price adjustments help in merging the short-run and long-run perspectives, particularly in how the economy adjusts to shocks or changes.

The Short-Run and Long-Run Models Used to Analyze the Dynamic