Hello,
Just having a little bit of confusion on LR vs SR.
Which inputs are fixed in the short run and long run?
From what I understand, Wages, Prices, Expectations, Labor, and Capital Costs are variable in the long run. Is there anything that is fixed in the long run?
Jpete.
That is a good question. The quick answer is no. Everything is variable in the long run.
A quick note on the macro models, the LRAS curve is vertical, because it’s constrained (so some people get confused and think this is something that’s ‘fixed’) by potential GDP. But even this can be increased if you can increase your capital ((labor, natural resources, physical), human capital or improve your technology/productivity.
Thanks BionicTurtle!