Because Markets May Not Clear for Several Months or Even

question 55

Multiple Choice

Because markets may not clear for several months or even several years,the classical model

• A) is no longer considered valuable by mainstream economists
• B) has no value when explaining a situation where excess supply exists
• C) is irrelevant to any discussion of a market in which excess demand exists
• D) does a better job of explaining short-term fluctuations than long-run growth
• E) does a better job of explaining long-run growth than short-run fluctuations

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Definitions:

Elastic Demands

A situation where the demand for a good or service significantly changes in response to changes in its price.

Close Substitutes

Products or services that can easily replace each other in the eyes of the consumer, offering similar benefits and functionalities.

Inelastic

A term describing a situation in which the quantity demanded or supplied of a good or service is relatively unresponsive to changes in price.

Elastic

Describes a situation in which the demand for a good or service significantly changes in response to changes in price.