The vertical aggregate supply curve is consistent with
A) the classical model
B) the short run macro model
C) a typical firm's supply curve
D) a positive demand shock
E) a negative demand shock

Question

Quizplus · Accepted Answer

The vertical aggregate supply curve is consistent with the classical model, which assumes that the economy is self-regulating and always returns to its full employment equilibrium level of output in the long run, regardless of short-term disturbances. In this model, the aggregate supply curve is a function of the factors of production, such as labor, capital, and technology, but not affected by changes in the aggregate demand. Therefore, the curve is vertical at the full employment level of output, indicating that any changes in aggregate demand will only lead to changes in the price level, not the output.

The Vertical Aggregate Supply Curve Is Consistent with