The interest rate effect, the wealth effect, and the foreign trade effect cause the aggregate supply curve to be upward sloping in the new classical model.

Question

Quizplus · Accepted Answer

These effects cause the aggregate demand curve to be downward sloping, not the aggregate supply curve. The aggregate supply curve is typically upward sloping due to factors like input costs and productivity, not these effects.

The Interest Rate Effect, the Wealth Effect, and the Foreign