What do proponents of the real business cycle model argue about the short-run aggregate supply curve?
A)that it is vertical
B)that it is positively sloped
C)that it is flat
D)that it is negatively sloped

Question

Quizplus · Accepted Answer

Proponents of the real business cycle model argue that the short-run aggregate supply curve is vertical because they believe that changes in aggregate demand have no effect on the economy in the short run, and that the economy naturally adjusts to shocks through changes in technology, labor supply, and capital stock. This means that, in the short run, the economy will always produce at its potential output, regardless of changes in aggregate demand.

What Do Proponents of the Real Business Cycle Model Argue