If prices were to adjust quickly:
A)Output gaps would be persistent
B)Output gaps would disappear quickly
C)Inflation would adjust slowly
D)The short-run aggregate supply curve would not shift

Question

Quizplus · Accepted Answer

If prices were to adjust quickly, output gaps would disappear quickly. This is because if prices adjust quickly, firms will have more incentive to produce goods and services to meet the demand, which would increase output and reduce the output gap.

If Prices Were to Adjust Quickly