Question

Which statement best describes how economists think about the flexibility of the price level over different periods of time?

The higher the overall level of competition in the economy, the less flexible prices will be.

Prices are relatively flexible in the short run but less flexible in the long run.

Prices change at about the same rate and magnitude regardless of the time frame.

Prices are relatively inflexible in the short run but more flexible in the long run.

Answer 1

--> D) Prices are relatively inflexible in the short run and more flexible in the long run... because, remaining options are untrue.

-->In macroeconomics, In the long run the general price level, contractual wage rates, and expectations adjust fully to the state of the economy, in contrast to the short run, when these variables may not fully adjust.So prices levels are more flexible in the long run.Price levels shows more flexibility in the competitive market.