Question

Equilibrium income is that level of income:______. a. which an economy is capable of producing without generating accelerating inflation. b. which an economy is capable of producing without generating unemployment. c. toward which the economy gravitates in the short-run. d. which the economy always produces.

Answer 1

Answer:

The correct answer is: c. toward which the economy gravitates in the short-run.

Explanation:

In the economic context, the Short Term is a period in which an economy does not have enough time to change its fixed expenses in order to reach new levels of profitability or production, so it must be limited to changes in variable costs. It is worth mentioning that the Short Term is not a defined period of time, but depends on each company, industry or economic variable.

One of the most important bases of the meaning of Short Term is that companies have fixed and variable costs. For example, some common expenses, wages and prices are fixed costs, so they cannot change to freedom to reach a new equilibrium.