Why is the relationship between the price level and total output is different in each of the three time horizons?
Multiple choice question.
Output prices are stickier than input prices.
Both input and output prices are sticky.
Input prices are stickier than output prices.
Both input and output prices are flexible.
1 answer
The correct answer is:
Input prices are stickier than output prices.
This reflects the idea that in the short run, input prices (like wages) tend to be more rigid or resistant to change compared to output prices, leading to variability in the relationship between price levels and total output across different time horizons.
