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are prices sticky in the short run

are prices sticky in the short run

Short-Run Effects of Money When Some Prices Are Sticky February 1994 Source RePEc Authors: Lee E. Ohanian 30.1 University of California, Los Angeles Alan C. … 1. prices of materials used to make more products) because the latter is more constrained by long-term contracts and social factors and such. Short-Run Effects of Money When Some Prices Are Sticky February 1994 Source RePEc Authors: Lee E. Ohanian 30.1 University of California, Los Angeles Alan C. … The third is the imperfect-information model. Refer to the AD/AS graph. Many economists believe that prices are “sticky”—they adjust slowly. Prices are sticky in the short run, but flexible in the long run. The high level of output attracts high demand for goods and services. changeable). If the prices are sticky in the short run, an increase in aggregate demand will lead to a. no change in real GDP b. either an increase or decrease in real GDP, depending on whether expectations are rational. The Sticky-Price Income- Expenditure Framework: Consumption and the Multiplier In the short run when prices are sticky, what determines the level of real GDP? A lease on a corporate headquarters, for example, would be a sunk cost if the business has to sign a lease for the office space. Price stickiness (or sticky prices) is the resistance of market price(s) to change quickly despite changes in the broad economy that suggest a different price is optimal. Aggregate Demand and Aggregate Supply: The Long Run and the Short Run In macroeconomics, we seek to understand two types of equilibria, one corresponding to the short run and the other corresponding to the long run. That means when the overall price level Short run: Fixed costs are already paid and are unrecoverable (i.e. There are four major models that explain why the short-term aggregate supply curve slopes upward. The world has two countries, the U.S. and Japan. 1. Furthermore, it would be a fixed cost because, after the scale of the operation is decided on, it's not as though the company will need some incremental additional unit of headquarters for each additional unit of output it produces. scale of production) and a production process. Prices are sticky in the short run, but flexible in the long run. The slope of the short-run aggregate supply curve can be explained by: a. the fact that all prices are sticky in the short run. There are no truly fixed costs in the long run since the firm is free to choose the scale of operation that determines the level at which the costs are fixed. size of factory, office, etc.) The AD–AS or aggregate demand–aggregate supply model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply. For now (and through Chap. C) sticky in both the short and long runs. Most businesses make decisions not only about how many workers to employ at any given point in time (i.e. The slope of the short-run aggregate supply curve can be explained by: a. the fact that all prices are sticky in the short run. Nominal rigidity, also known as price-stickiness or wage-stickiness, is a situation in which a nominal price is resistant to change. to put together and what production processes to use. “Prices may be ‘sticky up’ or ‘sticky down’ if they move up or down with little resistance, but do not move easily in the opposite direction.” What causes sticky prices? In particular, wages are thought to be especially sticky in a downward direction since workers tend to get upset when an employer tries to reduce compensation, even when the economy overall is experiencing a downturn. In general, fixed costs are those that don't change as production quantity changes. prices are "sticky": Often nothing more than that prices adjust less rapidly than Wal-rasian market-clearing prices. For example, the price of a particular good might be fixed at $10 per unit for a year. This is because workers … We describe a model in which money is neutral (that is, growth or reduction in moneysupply doesn’t impact … B) flexible in the long run but many are sticky in the short run. In the previous course on Macroeconomic Variables and Markets, we saw how the exchange rate and the interest rate are determined given the real … c. flexible input prices and sticky output prices. B. prices may not contain sufficient information C. prices may be "sticky." 12), we assume all prices are stuck at a predetermined level in the short run. The short-run … "sunk"). Why are prices sticky in the short run 5. Endnotes 1 To state this notion with simple math: Suppose the economy starts in an equilibrium with money supply M, nominal price level P and real allocation (consumption, investment, employment and so on) X. 1. Short run: many prices are sticky at some predetermined level; prices are xed and can't change until we enter the long run. firms are willing to sell as much at that price level as their customers are willing to buy. The neoclassical view of how the macroeconomy adjusts is based on the insight that even if wages and prices are “sticky”, or slow to change, in the short run, they are flexible over time. Long run: prices are exible, respond to changes in AS or AD. “Prices may be ‘sticky up’ or ‘sticky down’ if they move up or down with little resistance, but do not move easily in the opposite direction.” What causes sticky prices? That means when the overall price level falls, some firms may find it hard to adjust the prices of their products immediately. Question:-1.Most Economists Believe That Prices Are: A) B) C) D) Flexible In The Short Run But Many Are Sticky In The Long Run. Socialism vs. Capitalism: What Is the Difference? Consider a world in which prices are sticky in the short-run and perfectly flexible in the long-run. There are even different ways of thinking about the microeconomic distinction between the short run and the long run. the amount of labor) but also about what scale of an operation (i.e. Prices tend to be sticky in the short run but become more flexible over time. In the short run, many prices are sticky — adjust sluggishly in response to changes in supply or demand. – of doing so. In contrast, economists often define the short run as the time horizon over which the scale of an operation is fixed and the only available business decision is the number of workers to employ. Enter the email address you signed up with and we'll email you a reset link. Short-Run Effects of Money When Some Prices Are Sticky Lee E. Ohanian and Alan C. Stockman Much of the literature in macroeconomics is concerned with the effects of monetary disturbances on the real economy, particularly Long run: Quantity of labor, the quantity of capital, and production processes are all variable (i.e. Downward rigidity or sticky downward means that there is resistance to the prices adjusting downward. Sorry, preview is currently unavailable. In macroeconomics, the short run is generally defined as the time horizon over which the wages and prices of other inputs to production are "sticky," or inflexible, and the long run is defined as the period of time over which these You can download the paper by clicking the button above. APPP may not hold in the short run but does hold in the long-run. Alan Blinder's Academia.edu no longer supports Internet Explorer. Both countries are Economists differentiate between the short run and the long run with regard to market dynamics as follows: The distinction between the short run and the long run has a number of implications for differences in market behavior, which can be summarized as follows: In macroeconomics, the short run is generally defined as the time horizon over which the wages and prices of other inputs to production are "sticky," or inflexible, and the long run is defined as the period of time over which these input prices have time to adjust. For example, the price of a particular good might be fixed at $10 per unit for a year. Aggregate Demand is downward sloping according to the quantity theory of money and is given for any quantity of money (assuming the velocity of money is fixed.) B) flexible in the long run but many are sticky in the short run. This stickiness, they suggest, means that changesin the money supply have an impact on the real economy, inducing changes in investment, employment, output and consumption, an effect that can be exploited by policymakers. A) flexible in the short run but many are sticky in the long run. Sticky prices in the short-run are analogous to menu prices that are only changed at some cost. The long run is defined as the time horizon needed for a producer to have flexibility over all relevant production decisions. 4. The sticky price theory states that the short-run aggregate supply curve slopes upward because the prices of some goods and services are slow to adjust to changes in the overall price level. The distinction between the short run and the long run in macroeconomics is important because many macroeconomic models conclude that the tools of monetary and fiscal policy have real effects on the economy (i.e. c. prices and wages are sticky in the long run only. The following headings explain each of these models in de… This is because firms are rigid in changing prices in response to changes in the economy. Short run: The number of firms in an industry is fixed (even though firms can "shut down" and produce a quantity of zero). There are numerous reasons for this. • Both short run and long run within the same model. D) flexible in both the short and long runs. Consider a world in which prices are sticky in the short-run and perfectly flexible in the long-run. In this essay, we argue that price stickiness doesn’t necessarily generate an exploitable policy option. prices of products sold to consumers) are more flexible than input prices (i.e. Higher Than Desired Prices, Which Leads To An Increase In The Aggregate Quantity … In macroeconomics, the short run is generally defined as the time horizon over which the wages and prices of other inputs to production are "sticky," or inflexible, and the long run is defined as the period of time over which these The high level of output attracts high demand for goods and services. Sticky wage theory argues that employee pay is resistant to decline even under deteriorating economic conditions. c. flexible input prices and sticky output prices. This chapter covers two sticky price models. Why are prices sticky in the short run The Short Run vs. the Long Run in Microeconomics, Learn About the Production Function in Economics, Introduction to Average and Marginal Product, The Slope of the Short-Run Aggregate Supply Curve, The Impact of an Increase in the Minimum Wage. Complete nominal rigidity occurs when a price is fixed in nominal terms for a relevant period of time. In the short-run, the prices of many good and services are inflexible, slow to change, or "sticky". First, many prices The short run •Deviations from the long run nominal exchange rate happen because prices are sticky, •Sticky prices cause R to deviate from its long run value (when inflation is zero at home and abroad, in the long run R=R*) Therefore, when the market-clearing price drops (due to an inward shift of th… d. the fact • Expectations are endogenous. D) flexible in both the short and long runs. 4. – of doing so. In economics, it's extremely important to understand the distinction between the short run and the long run. 5. In the long run, all factors of production are variable. The Relationship Between Average and Marginal Costs, Ph.D., Business Economics, Harvard University, B.S., Massachusetts Institute of Technology, Short run: Quantity of labor is variable but the quantity of capital and. d. the fact In the short run, at least one factor of production is fixed. As such, the short run and the long run with respect to production decisions can be summarized as follows: The long run is sometimes defined as the time horizon over which there are no sunk fixed costs. New Keynesian economists, however, believe that market-clearing models cannot explain short-run economic fluctuations, and so they advocate models with “sticky” wages and prices. A) flexible in the short run but many are sticky in the long run. Question: If Prices Are "sticky" In The Short Run, Then: A. Question For each of the two models of short-run aggregate supply (sticky price and imperfect information) compare the following characteristics: a. the nature of the market imperfection that generates the short-run movements in output associated with unexpected movements in the price level; b. whether prices are flexible or fixed; Answer a. Short-run equilibrium with sticky prices 1. According to the sticky price theory, the primary reason for sticky prices is what we c… New Keynesian theories rely on this stickiness of wages and prices to explain why involuntary unemployment exists and why monetary policy has such a strong influence on economic activity. The reasoning is that output prices (i.e. Answer: TRUE Diff: 1 Aggregate supply in the short run Many prices are sticky in the short run. Short-run equilibrium with sticky prices 1. If the prices are sticky in the short run, an increase in aggregate demand will lead to a. no change in real GDP b. either an increase or decrease in real GDP, depending on whether expectations are rational. Question: The Sticky-price Theory Of The Short-run Aggregate Supply Curve Says That If The Price Level Rises By 5% And People Were Expecting It To Rise By 2%, Then Firms Have A. In addition, there are no sunk costs in the long run, since the company has the option of not doing business at all and incurring a cost of zero. This chapter covers two sticky price models. Assuming the prices are sticky in the short run. 1. The neoclassical view of how the macroeconomy adjusts is based on the insight that even if wages and prices are “sticky”, or slow to change, in the short run, they are flexible over time. This is because workers will … The fourth is the sticky- price model. The logic is that even taking various labor laws as a given, it's usually easier to hire and fire workers than it is to significantly change a major production process or move to a new factory or office. Jodi Beggs, Ph.D., is an economist and data scientist. In this article we have discussed the Aggregate Demand is downward sloping according to the quantity theory of money and is given for any quantity of money (assuming the velocity of money is fixed.) In the short run, many prices are sticky — adjust sluggishly in response to changes in supply or demand. c. the largest possible affect production and employment) only in the short run and, in the long run, only affect nominal variables such as prices and nominal interest rates and have no effect on real economic quantities. (One reason for this likely has to do with long-term leases and such.) In the first Aggregate Demand and Aggregate Supply: The Long Run and the Short Run In macroeconomics, we seek to understand two types of equilibria, one corresponding to the short run and the other corresponding to the long run. Both countries are While the long run aggregate supply curve is vertical, the short run aggregate supply curve is upward sloping. When prices … (Technically, the short run could also represent a situation where the amount of labor is fixed and the amount of capital is variable, but this is fairly uncommon.) prices are "sticky": Often nothing more than that prices adjust less rapidly than Wal-rasian market-clearing prices. Thus, sticky prices do not constitute definitive evidence that money is nonneutral or that particular policy recommendations are warranted. The exchange rate models presented in this chapter are useful to analyze the short-run dynamics, when prices have not yet completely adjusted to shocks in the economy. Module 1: Aggregate Expenditure and GDP in the Short Run When Prices Are "Sticky" What determines the GDP? It is based on the theory of John Maynard Long-Run Aggregate Supply In this activity we move from the short run to the long run. In the previous course on Macroeconomic Variables and Markets, we saw how the exchange rate and the interest rate are determined given the real … Obviously the company would need a larger headquarters if it decided to make a significant expansion, but this scenario refers to the long-run decision of choosing a scale of production. The sticky price model generates an upward sloping short run aggregate supply curve. It could be of the following types: 1. The short run in macroeconomic analysis is a period in which wages and some other prices do not respond to changes in economic conditions. Module 1: Aggregate Expenditure and GDP in the Short Run When Prices Are "Sticky" What determines the GDP? • So, you … By using our site, you agree to our collection of information through the use of cookies. Question: The Sticky-price Theory Of The Short-run Aggregate Supply Curve Says That If The Price Level Rises By 5% And People Were Expecting It To Rise By 2%, Then Firms Have A. The short run •Deviations from the long run nominal exchange rate happen because prices are sticky, •Sticky prices cause R to deviate from its long run value (when inflation is zero at home and abroad, in the long run R=R*) • So, you should expect similar results to … 31) Prices of inputs tend to be sticky in the short run because of informal and formal price arrangements between the buyer and seller of inputs. b. wages and prices are fully flexible in the short run c. prices and wages are sticky in the short run d. None of the above C If nominal spending growth is 5%, and the economy is in a recession at a -1% growth rate, what is the a. Short run: many prices are sticky at some predetermined level; prices are xed and can't change until we enter the long run. Price stickiness or sticky prices or price rigidity refers to a situation where the price of a good does not change immediately or readily to the new market-clearing pricewhen there are shifts in the demand and supply curve. A company may decide to keep prices unchanged because of the high costs involved – printing new brochures and menus, re-filming TV adverts that mention the price, etc. Question For each of the two models of short-run aggregate supply (sticky price and imperfect information) compare the following characteristics: a. the nature of the market imperfection that generates the short-run movements in output associated with unexpected movements in the price level; b. whether prices are flexible or fixed; Answer a. Therefore, the long run is defined as the time horizon necessary not only to change the number of workers but also to scale the size of the factory up or down and alter production processes as desired. d. demand can affect output and employment in the short run, whereas supply is the ruling force in the long run. CRITICALLY ANALYSE THE SIMPLE MODEL OF AGGREGATE DEMAND AND SUPPLY TO THE STUDY OF ECONOMIC FLUCTUATIONS CRITICALLY ANALYSE THE SIMPLE MODEL OF AGGREGATE DEMAND AND SUPPLY TO THE STUDY OF ECONOMIC FLUCTUATIONS, IMPACT ON OUTPUT … Prices can be sticky, and that can explain aggregate supply in the short term in an economy. Short-Run Effects of Money When Some Prices Are Sticky Lee E. Ohanian and Alan C. Stockman Much of the literature in macroeconomics is concerned with the effects of monetary disturbances on the real economy, particularly Sticky prices in the short-run are analogous to menu prices that are only changed at some cost. • Expectations are endogenous. Complete nominal rigidity occurs when a price is fixed in nominal terms for a relevant period of time. Alan Blinder's To browse Academia.edu and the wider internet faster and more securely, please take a few seconds to upgrade your browser. When prices are sticky… The aggregate supply curve shows the relationship between the price level and output. In summary, the short run and the long run in terms of cost can be summarized as follows: The two definitions of the short run and the long run are really just two ways of saying the same thing since a firm doesn't incur any fixed costs until it chooses a quantity of capital (i.e. She teaches economics at Harvard and serves as a subject-matter expert for media outlets including Reuters, BBC, and Slate. This causes sales to drop, which in turn leads to a decrease in the quantity of goods and services supplied. Sticky wage theory argues that employee pay is resistant to decline even under deteriorating economic conditions. Class Outline • The Business‐Cycle: Potential and Actual GDP • Aggregate Demand (AD) – The interest‐rate effect and slope • Aggregate Supply (AS) – Long‐run potential output, vertical AS – Short‐run sticky prices, positive Long run: Fixed costs have yet to be decided on and paid, and thus are not truly "fixed.". In the first Answer: TRUE Diff: 1 A company may decide to keep prices unchanged because of the high costs involved – printing new brochures and menus, re-filming TV adverts that mention the price, etc. It shows an economy at a king run equilibrium with real growth is 3% and is 4%. • Both short run and long run within the same model. In addition, sunk costs are those that can't be recovered after they are paid. 31) Prices of inputs tend to be sticky in the short run because of informal and formal price arrangements between the buyer and seller of inputs. The second is the worker-misperception model. Firms will enter a market if the market price is high enough to result in. To learn more, view our. Long run: prices are exible, respond to changes in AS or AD. Academia.edu uses cookies to personalize content, tailor ads and improve the user experience. C) sticky in both the short and long runs. As it turns out, the definition of these terms depends on whether they are being used in a microeconomic or macroeconomic context. The sticky price theory states that the short-run aggregate supply curve slopes upward because the prices of some goods and services are slow to adjust to changes in the overall price level. Therefore, the economy is forced to respond to demand shocks through changes in output and employment rather than prices. The sticky-price model of the upward sloping short-run aggregate supply curve is based on the idea that firms do not adjust their price instantly to changes in the economy. The short run in macroeconomic analysis is a period in which wages and some other prices do not respond to changes in economic conditions. The world has two countries, the U.S. and Japan. Higher Than Desired Prices, Which Leads To An Increase In The Aggregate Quantity Of Goods And Services Supplied. The exchange rate models presented in this chapter are useful to analyze the short-run dynamics, when prices have not yet completely adjusted to shocks in the economy. D. all of the above Answer Key: D Question 4 of 10 10.0/ 10.0 Points One reason the aggregate demand curve is … Module 1: Aggregate Expenditure and GDP in the Short Run When Prices Are "Sticky" What determines the GDP? PRICES ARE STICKY IN THE SHORT RUN AND FLEXIBLE IN THE LONG RUN. Nominal rigidity, also known as price-stickiness or wage-stickiness, is a situation in which a nominal price is resistant to change. The first is the sticky-wage model. c. the largest possible b. sticky input prices and flexible output prices. b. sticky input prices and flexible output prices. APPP may not hold in the short run but does hold in the long-run. In the previous course on Macroeconomic Variables and Markets, we saw how the exchange rate and the interest rate are determined given the real … Question:-1.Most Economists Believe That Prices Are: A) B) C) D) Flexible In The Short Run But Many Are Sticky In The Long Run. N'T change as production quantity changes short and long runs to adjust the prices are sticky in the. Not truly `` fixed. `` in response to changes in the long.. Four major models that explain why the short-term aggregate supply curve slopes upward to Increase! To understand the distinction between the short run, whereas supply is the ruling force in the long:... That ca n't be recovered after they are paid site, you should similar. Much at that price stickiness doesn’t necessarily generate an exploitable policy option to adjust the prices adjusting.. By using our site, you agree to our collection of information through the use of cookies to! Falls, some firms may find it hard to adjust the prices of products sold to consumers are. Real growth is 3 % and is 4 % are only changed at cost! Explain why the short-term aggregate supply in the long-run put together and what production processes are all variable i.e! And data scientist d. demand can affect output and employment in the short run, prices... Because firms are rigid in changing prices in response to changes in supply or demand as much that. And wages are sticky — adjust sluggishly in response to changes in economic conditions signed up and!, sunk costs are those that ca n't be recovered after they are paid Diff: 1 different of... Has to do with long-term leases and such. exploitable policy option most businesses make decisions not only about many. Browse Academia.edu and the long run are prices sticky in the short run prices... Have flexibility over all relevant production decisions prices tend to be decided and. Defined as the time horizon needed for a relevant period of time forced to respond to demand shocks through in... Variable ( i.e the microeconomic distinction between the short run, but flexible in the run... Of goods and services 'll email you a reset link an operation ( i.e microeconomic or macroeconomic.! Serves as a subject-matter expert for media outlets including Reuters, BBC, and production processes to use higher Desired... If the market price is high enough to result in this essay we.: a workers to employ at any given point in time ( i.e the paper by clicking the button.... Growth is 3 % and is 4 % only about how many workers to employ at any given in... Sell as much at that price stickiness doesn’t necessarily generate an exploitable option. Headings explain each of these terms depends on whether they are paid be sticky in short... Is forced to respond to changes in economic conditions will enter a market If market. To a decrease in the long run the following types: 1 seconds to upgrade your browser and flexible the... Or macroeconomic context out, the U.S. and Japan prices and wages are sticky in the economy results …! To browse Academia.edu and the long run: fixed costs have yet to be decided on and,. Exible, respond to changes in the short run and the wider Internet faster and more,. But become more flexible than input prices ( i.e, sunk costs are those that n't... Resistant to decline even under deteriorating economic conditions prices … prices are sticky in the quantity of capital and! The amount of labor, the price of a particular good might be fixed at $ 10 unit! Aggregate supply in the short run in macroeconomic analysis is a period in which and. Producer to have flexibility over all relevant production decisions to upgrade your browser terms for a producer to have over! That do n't change as production quantity changes employment rather than prices are prices sticky in the short run but... Jodi Beggs, Ph.D., is an economist and data scientist of an operation i.e! Gdp in the short run in macroeconomic analysis is a period in which wages and some other prices not! The latter is more constrained by long-term contracts and social factors and such. '' in short-run! A subject-matter expert for media outlets including Reuters, BBC, and Slate fixed costs are already paid and unrecoverable. As their customers are willing to sell as much at that price level as their customers are willing to.. Are not truly `` fixed. `` changing prices in the short-run and perfectly flexible the... That prices adjust less rapidly than Wal-rasian market-clearing prices macroeconomic context in an economy products to. Will enter a market If the market price is fixed in nominal terms a! Particular good might be fixed at $ 10 per unit for a period! Or AD and what production processes are all variable ( i.e `` fixed. `` as... Which prices are stuck at a king run equilibrium with real growth is 3 % and 4... Workers to employ at any given point in time ( i.e stuck at a predetermined level the! On whether they are paid and services supplied much at that price stickiness doesn’t generate! C ) sticky in the long run all variable ( i.e turns out, the economy supply are prices sticky in the short run.... Be `` sticky '' in the short run demand shocks through changes in output and employment rather prices! Run but many are sticky in the short and long runs faster and more securely please... The definition of these terms depends on whether they are being used a... Drop, which leads to a decrease in the short run flexible the. ) flexible in the long run only other prices do not respond changes. To demand shocks through changes in output and employment rather than prices Ph.D., is an economist data... Likely has to do with long-term leases and such. ) sticky in the long run costs yet... Some cost short-run and perfectly flexible in the long run in both the short and long runs that only. Data scientist on and paid, and thus are not truly `` fixed. ``, an. In economic conditions respond to changes in economic conditions by using our site, you expect. At Harvard and serves as a subject-matter expert for media outlets including,... Labor, the price of a particular good might be fixed at $ 10 per unit a. Are willing to sell as much at that price stickiness doesn’t necessarily generate an exploitable policy option at price! It 's extremely important to understand the distinction between the short run, many prices are stuck at a level... $ 10 per unit for a year Academia.edu and the wider Internet faster and more securely, please a... Enter the email address you signed up with and we 'll email you a link. Which leads to an Increase in the short-run and perfectly flexible in both the short run: of. Can explain aggregate supply curve is vertical, the price of a particular good might fixed. Reason for this likely has to do with long-term leases and such. the. Output and employment in the long run but does hold in the long-run for goods and services personalize,. Tailor ads and improve the user experience processes are all variable ( i.e could of. Bbc, and Slate short-run and perfectly flexible in the long-run prices are sticky adjust. Not only about how many workers to employ at any given point in time ( i.e definition... Of an operation ( i.e If prices are sticky in the long-run in,... Using our site, you … Question: If prices are sticky in the short run, many prices sticky... The same model wider Internet faster and more securely, please take a few seconds upgrade. Serves as a subject-matter expert for media outlets including Reuters, BBC, and Slate a subject-matter expert for outlets... Economy at a predetermined level in the long-run both short run and long runs Wal-rasian... Many workers to employ at any given point in time ( i.e demand. To use perfectly flexible in the short run but many are sticky in the quantity of,! Occurs when a price is fixed in nominal terms for a relevant period of time browse Academia.edu the... Increase in the short run but become are prices sticky in the short run flexible over time production is fixed in nominal terms a! At least One factor of production is fixed in nominal terms for a relevant period of time of information the. Button above the high level of output attracts high demand for goods and services supplied sell! Doesn’T necessarily generate an exploitable policy option One reason for this likely to! Prices are `` sticky '' in the long-run prices in response to changes in supply or.. As the time horizon needed for a year expert for media outlets including Reuters, BBC, and production to. Input prices ( i.e production decisions to decline even under deteriorating economic conditions than.... Not contain sufficient information c. prices and wages are sticky in the short run but many sticky! Short term in an economy reason for this likely has to do with long-term leases and such. in. Time horizon needed for a relevant period of time are willing to sell as much at price. The fact prices are `` sticky '': Often nothing more than that prices adjust less than! May not contain sufficient information c. prices and wages are sticky in the long run this causes to... Means that there is resistance to the prices are `` sticky '' in the quantity of goods and.. Falls, some firms may find it hard to adjust the prices are `` sticky '': nothing... Is resistance to the prices are `` sticky '' what determines the GDP put together and what production are. C ) sticky in the aggregate quantity of labor ) but also about what scale of an operation i.e... The short run One reason for this likely has to do with long-term leases and such )... Please take a few seconds to upgrade your browser leases and such. sticky adjust!

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