1 Time horizons ■Long run: Prices are flexible,respond to changes in supply or demand ■Short run: many prices are"sticky"at some predetermined level The economy behaves much differently when prices are sticky. CHAPTER 9 Introduction to Economic Fluctuations slide 4slide 4 § Long run: Prices are flexible, respond to changes in supply or demand § Short run: many prices are “sticky” at some predetermined level The economy behaves much differently when prices are sticky. 1