Which of the following best explains why long-run objectives should take precedence over short-run objectives in economic policy analysis?

• A. Long-run objectives are easier to measure than short-run objectives.
• B. Long-run objectives focus on sustainable growth and overall welfare, while short-run objectives may only address temporary issues.
• C. Short-run objectives are irrelevant in both positive and normative analysis.
• D. Short-run objectives always lead to higher profits for firms.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the difference between short-run and long-run objectives in economic policy. Short-run objectives typically address immediate or temporary issues, while long-run objectives focus on sustainable growth and overall welfare over time.
2. Step 2: Recognize that economic policies aimed at the short run might provide quick fixes but can sometimes lead to unintended negative consequences in the future, such as inflation or resource depletion.
3. Step 3: Analyze why long-run objectives are prioritized: they ensure that economic growth is sustainable, resources are used efficiently, and overall welfare improves steadily, which benefits society as a whole.
4. Step 4: Evaluate the incorrect options by considering their validity: for example, short-run objectives are not irrelevant, nor do they always lead to higher profits; also, long-run objectives are not necessarily easier to measure than short-run ones.
5. Step 5: Conclude that the best explanation is that long-run objectives focus on sustainable growth and overall welfare, which is why they should take precedence over short-run objectives in economic policy analysis.