In the short run,
A)inflation has inertia.
B)the classical dichotomy does not hold.
C)inflation adjusts instantly.
D)inflation is governed only by money.
E)a and b are correct.

Question

Quizplus · Accepted Answer

In the short run, inflation has inertia, meaning that it takes time for prices to adjust to changes in the economy. This violates the classical dichotomy, which assumes that prices and inflation should adjust immediately based on changes in the money supply. Therefore, choices A and B are correct. Choice C is incorrect, and choice D is too narrow, as inflation is also influenced by factors such as supply and demand for goods and services, as well as government policies.

In the Short Run