In the classical model
A) the level of real GDP per year does not depend on the level of aggregate demand.
B) the level of GDP is demand determined.
C) changes in aggregate supply affect the price level, not real GDP.
D) the level of GDP determines prices independent of demand.

Question

Quizplus · Accepted Answer

In the classical model, the level of real GDP per year does not depend on the level of aggregate demand. Instead, it is primarily determined by factors such as the availability of resources, technology, and the level of productivity. This means that changes in aggregate demand will mainly affect the price level, rather than the level of real GDP.

In the Classical Model