The Main Difference Between the Short-Run and the Long-Run Aggregate

question 58

Multiple Choice

The main difference between the short-run and the long-run aggregate supply in the Keynesian model is

• A)in the short run prices and wages are assumed fixed,but in the long run they are assumed flexible.
• B)in the short run prices are assumed flexible but wages fixed,whereas in the long run both are assumed flexible.
• C)in the short run wages are assumed flexible but prices fixed,whereas in the long run both are assumed flexible.
• D)in the short run potential GDP is equal to actual GDP,but in the long run the former exceeds the latter.

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Definitions:

Shareholder

An individual or entity that owns one or more shares of stock in a publicly-traded company, making them partial owners.

Firm's Profits

The financial gains a firm obtains after deducting all expenses, taxes, and costs from its total revenues.

Financial Capital Markets

Marketplaces where individuals and institutions can trade financial securities, commodities, and other fungible assets.

Savers

Individuals who allocate a portion of their income towards savings, either in cash, bank deposits, or other forms of investment, for future use.