According to the flexible price framework ________.
A)aggregate output is determined by the production function with given levels of capital and labor
B)the interest rate is solely determined by the interaction of savings and investment
C)nominal and real variables are completely independent
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The flexible price framework posits that prices adjust to ensure that supply equals demand in all markets. This implies that aggregate output is determined by the production function with given levels of capital and labor (A), the interest rate is determined by the interaction of savings and investment (B), and there is a dichotomy between nominal and real variables, making them independent (C). Therefore, all of the statements A, B, and C are correct in the context of the flexible price framework.

According to the Flexible Price Framework ________