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What is Long run and short run in macroeconomics?
In macroeconomics, the short run refers to a period where some factors of production are fixed, and firms can only adjust variable inputs, leading to temporary fluctuations in output and employment levels. Conversely, the long run is a period where all factors of production can be varied, allowing for adjustments in capital and labor, leading to a more stable equilibrium of economic output and prices. Decisions made in the short run are often influenced by immediate market conditions, while long-run outcomes are shaped by structural changes in the economy.
What happens to prices and output in short run when Short-run aggregate demand shifts left?
Prices rise, output rises
Cost output relationship in short run?
cost output relationship
A horizontal short-run aggregate supply SRAS curve implies that in the short run?
In the short run, prices are fixed and firms produces output to meet demands. So, firms take prices as given and produce output to meet desired expenditure.
What is equilibrium GDP?
In the short run, equilibrium GDP is the level of output at which output and aggregate expenditure are equal
What is Long run and short run in macroeconomics?
In macroeconomics, the short run refers to a period where some factors of production are fixed, and firms can only adjust variable inputs, leading to temporary fluctuations in output and employment levels. Conversely, the long run is a period where all factors of production can be varied, allowing for adjustments in capital and labor, leading to a more stable equilibrium of economic output and prices. Decisions made in the short run are often influenced by immediate market conditions, while long-run outcomes are shaped by structural changes in the economy.
What happens to prices and output in short run when Short-run aggregate demand shifts left?
Prices rise, output rises
Cost output relationship in short run?
cost output relationship
In short run does demand pull raise both the price level and the real output?
No, it only raises the price level. Output cannot adjust quick enough in the "short run". That's why it's called the short run.
A horizontal short-run aggregate supply SRAS curve implies that in the short run?
In the short run, prices are fixed and firms produces output to meet demands. So, firms take prices as given and produce output to meet desired expenditure.
What is equilibrium GDP?
In the short run, equilibrium GDP is the level of output at which output and aggregate expenditure are equal
Expliain Cost- Output relationship both in the short-run and long-run?
THE SHORT-RUN COST-OUTPUT RELATIONSHIP REFERS TO A PARTICULAR SCALE OF OPERATION OR TO A FIXED PLANT. IT INDICATES VARIATIONS IN COST OVER OUTPUT FOR THE PLANT OF A GIVEN CAPACITY AND THEIR RELATIONSHIP WILL VARY WITH PLANTS OF VARYING CAPACITY.
If a firm decides to produce no output in the short run its costs will be?
its fixed cost
What determines the level of output in the long-run versus the short run?
In the long run, the level of output is determined by the capacity of a firm to adjust all of its inputs, such as labor and capital, to reach its optimal production level. In the short run, output is influenced by fixed factors like plant size and technology, which limit the firm's ability to adjust production quickly.
How does the economy self-correct and move from a short-run inflationary gap to a long-run equilibrium?
The economy self-corrects from a short-run inflationary gap to long-run equilibrium through the adjustment of prices and wages. As demand exceeds supply, prices rise, leading to increased costs for businesses. This prompts firms to reduce output and employment, ultimately decreasing aggregate demand. Over time, as wages and input prices adjust downward, the economy moves back toward its potential output, restoring equilibrium.
Most economists use the aggregate demand and aggregate supply model primarily to analyze?
Short-run fluctuations in the economy
Is the AVC increases as the level of output increases in the short-run?
Yes, in the short run, as output increases, average variable cost (AVC) tends to decrease at first due to economies of scale, but eventually increases due to diminishing returns to variable factors of production.
