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SHORT RUN ECONOMIC
Ford motor company is a firm that operates in the automobile
The economic activity of the company, just like any other’s
undergoes fluctuations from one year to another.
Over time, the production of automobiles has increased due
to a rise in the capital stock, the labor force, and advanced
technology, this growth in the economy allows for people to
enjoy high living standards.
The model of aggregate demand and aggregate supply is
used in analyzing short run fluctuations in the economy.
SHORT-RUN ECONOMIC FLUCTUATIONS
activities fluctuate every year i.e.
production of motor vehicles goes up in most years.
During certain years, when normal growth does not take place,
a recession takes place
The production of motor vehicles in the economy of the United
States has risen by approximately 3 percent every year.
recession refers to a duration where the real GDP
declines, incomes fall, and unemployment rises.
A depression occurs as a result of severe recession
(Friedman & Vandersteel, 1982)
SHORT RUN VS LONG RUN
quantity is variable
but production processes
and capital quantity are
Fixed costs are usually
already covered and thus
unrecoverable or “sunk”
The labor quantity, processes
of production, and the
capital quantity in the
company are all variable.
The fixed costs have not
been decided yet and not
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