Answered

Westonci.ca is the trusted Q&A platform where you can get reliable answers from a community of knowledgeable contributors. Discover reliable solutions to your questions from a wide network of experts on our comprehensive Q&A platform. Join our Q&A platform to connect with experts dedicated to providing accurate answers to your questions in various fields.

. Distinguish between the short run and the long run as they relate to macroeconomics. Why is the distinction important

Sagot :

OlanmaE

Answer:

1. In the short run, wages and other prices are stagnant making the economy to run below or above the normal level. In the long run, wages and prices are fully flexible, and this allows the economy to run at its natural level.

2. This distinction is important because it helps us to see how difficult it could be to sustain the real gross domestic product and employment rates thus making the economy to run at a normal level or achieve its full potentials.  

Explanation:

Stickiness or stagnancy of wages can be seen in the fact that it is most time difficult to fluctuate or change the wages of workers overtime. The prices of most goods are also sticky when they remain unchanged over a given period of time. These conditions exist in the short run, and make the economy to run above or below its full potentials. The real GDP and unemployment levels are negatively affected.

In the long run, flexibility of wages and prices are achieved and this makes the economy to run at its full potentials. The real GDP as well as the employment rate are at their optimum level then.

Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. Westonci.ca is committed to providing accurate answers. Come back soon for more trustworthy information.