Question

1. A difference between the economic long run and the short run is that:

a. the classical dichotomy holds in the short run but not in the long run.
b. monetary and fiscal policy affect output only in the long run.
c. demand can affect output and employment in the short run, whereas supply is the ruling force in the long run.
d. prices and wages are sticky in the long run only.

Answer 1

The correct answer is C. A difference between the economic long run and the short run is that demand can affect output and employment in the short run, whereas supply is the ruling force in the long run.

Step-by-step explanation:

In economics, the long run is the conceptual time period for which we have no fixed factors of production. In contrast to the long run, in the short run we have some variable and some fixed factors, relative to the chosen level of production. In the long run, companies change production levels in response to economic profit or loss, and land, labor, capital goods, and entrepreneurship vary to reach the corresponding level of production associated with long-term equilibrium.