What are the three time horizons used to categorize aggregate supply? What is the difference between the immediate short-run and the short-run aggregate supply?
What will be an ideal response?
The three time horizons used to categorize the aggregate supply curve are the immediate short run, the short run and the long run. In the immediate short run, both input and output prices are fixed, and the aggregate supply curve is horizontal. The aggregate supply curve in the short run is up sloping because the price of output could vary. The price of inputs, however, is also fixed in the short run. The main difference between the immediate short-run and the short-run aggregate supply is then the flexibility of output prices in the short run.
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