In the new classical model, the aggregate supply curve is:
A) upward sloping in both the short run and the long run.
B) perfectly vertical at the natural rate of unemployment in both the short run and the long run.
C) upward sloping in the short run and perfectly vertical at the natural rate of unemployment in the long run.
D) perfectly vertical at the natural rate of unemployment in the short run and upward sloping in the long run.

Question

Quizplus · Accepted Answer

In the new classical model, the aggregate supply curve is upward sloping in the short run due to sticky prices and perfectly vertical at the natural rate of unemployment in the long run due to rational expectations.

In the New Classical Model, the Aggregate Supply Curve Is