In the new classical model, aggregate supply is upward sloping in the short run, and perfectly vertical at the natural rate of unemployment in the long run.

Question

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In the new classical model, the short-run aggregate supply curve is upward sloping due to price and wage stickiness, but in the long run, it becomes perfectly vertical at the natural rate of unemployment, reflecting full employment and no output gap.

In the New Classical Model, Aggregate Supply Is Upward Sloping