Proponents of the real business cycle model argue that the short-run aggregate supply curve is
A)flat.
B)positively sloped.
C)vertical.
D)negatively sloped.

Question

Quizplus · Accepted Answer

The real business cycle (RBC) model posits that changes in technology and productivity cause fluctuations in output and employment levels in the short run, but in the long run, the economy returns to its full-employment level of output regardless of changes in aggregate demand. This implies that the short-run aggregate supply curve is vertical, meaning that changes in aggregate demand will only affect the price level, but not output or employment levels. Therefore, the best choice is C.

Proponents of the Real Business Cycle Model Argue That the Short-Run