Those who believe that wages adjust quickly to clear the labor market also believe that:
A) the AS curve is upward sloping.
B) the AS curve is vertical.
C) the AD curve is steep.
D) the AD curve is flat.

Question

Quizplus · Accepted Answer

Those who believe that wages adjust quickly to clear the labor market hold the classical view of macroeconomics, which assumes that the economy is always at or near its potential output level. In this view, changes in aggregate demand do not affect the long-run level of output as supply (i.e., the AS curve) is vertical. Therefore, the correct answer is B.

Those Who Believe That Wages Adjust Quickly to Clear the Labor