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Homework answers / question archive / Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run

Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run

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Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run.

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The following are the facts on short-run economic fluctuations.

i. As the output decreases, there is an increase in unemployment levels.

ii. Many macroeconomic variables fluctuate together.

iii. Fluctuations in the economy are unpredictable and irregular.

The differences in the fluctuations in the short-run and long-run are;

  • Variations in money supply have effects on nominal variables but not the real variables in the long-run.
  • The assumption on the neutrality of money is inappropriate when studying yearly changes in the economy.