When studying the short-run behaviour of the economy an assumption of ______ is more plausible,in contrast to studying the long-run equilibrium behaviour of an economy,when an assumption of ______ is more plausible.
A) inflation; unemployment
B) unemployment; inflation
C) flexible prices; sticky prices
D) sticky prices; flexible prices

Question

Quizplus · Accepted Answer

In the short run, prices are often assumed to be sticky, meaning they do not adjust immediately to changes in economic conditions. In the long run, prices are assumed to be flexible, allowing the economy to reach equilibrium.

When Studying the Short-Run Behaviour of the Economy an Assumption