The self-correcting nature of markets draw the economy back to long-run equilibrium. This is because in the long run, __________.

Question

A. Prices of inputs are flexible
B. Prices of goods and services are flexible
C. Prices of inputs are inflexible
D. Prices of goods and services are inflexible

Answer 1

The correct answer is A. Prices of inputs are flexible.

In the long run, prices of inputs (such as labor and raw materials) are flexible, allowing businesses to adjust to changes in demand and supply conditions. This flexibility helps the economy return to a long-run equilibrium, where resources are allocated efficiently and full employment is achieved.