The short-run aggregate supply curve in modern Keynesian analysis
A) is a horizontal line the same as in the Keynesian model.
B) is a vertical line the same as in the classical model.
C) is an upward sloping curve.
D) is a negatively sloped curve.

Question

Quizplus · Accepted Answer

In modern Keynesian analysis, the short-run aggregate supply curve is upward sloping, meaning that as the price level increases, firms are willing to increase production due to sticky wages and prices. This is different from the classical model, where the short-run aggregate supply curve is vertical, and the Keynesian model, where the short-run aggregate supply curve is a horizontal line.

The Short-Run Aggregate Supply Curve in Modern Keynesian Analysis