In the Classical model, an increase in aggregate demand leads to __________ real GDP and __________ price level.
A) an unchanged; an unchanged
B) a rising; an unchanged
C) a rising; a rising
D) an unchanged; a rising

Question

Quizplus · Accepted Answer

In the Classical model, the economy is always at full employment, so real GDP remains unchanged. However, an increase in aggregate demand leads to a higher price level.

In the Classical Model, an Increase in Aggregate Demand Leads