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It is most important to distinguish between the short run and the long run when we...

It is most important to distinguish between the short run and the long run when we are discussing

aggregate supply.

aggregate expenditures.

money demand.

aggregate demand.
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Answer #1

The correct answer is 'Option A'.

It is most important to distinguish between short-run and long-run aggregate supply. This is because the aggregate supply curve is downward sloping in the short-run and vertical in the long-run. The short-run aggregate supply is affected due to changes in aggregate demand but it is not the case with long-run aggregate supply. The aggregate supply curve is vertical in the long-run which shows that the aggregate supply is constant and the economy is producing the potential output. Therefore, the correct answer is 'Option A'.

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