According to economists, the fixed-price model of macroeconomic equilibrium depicts the modern economy most closely because it assumes that aggregate supply is independent of price.

Question

Quizplus · Accepted Answer

The statement is incorrect. The fixed-price model assumes that prices are fixed in the short run, but it also assumes that changes in aggregate demand can affect output and employment. Therefore, the model implies that aggregate supply is not independent of price. In the long run, the model assumes that prices can adjust to equate aggregate supply and demand, but this does not imply that aggregate supply is fixed or independent of price.

According to Economists, the Fixed-Price Model of Macroeconomic Equilibrium Depicts