If the short-run aggregate supply curve is assumed to be horizontal and there are no international capital flows,then the big,comprehensive model corresponds to which of the following special cases?
A) classical closed economy
B) aggregate demand and aggregate supply
C) IS-LM model
D) Mundell-Fleming with floating exchange rate

Question

Quizplus · Accepted Answer

The IS-LM model is a macroeconomic model that explains the relationship between interest rates and real output in the goods and services market and the money market. In the short run, with a horizontal aggregate supply curve and no international capital flows, the IS-LM model is applicable as it focuses on the interaction between the goods market (IS curve) and the money market (LM curve) in a closed economy.

If the Short-Run Aggregate Supply Curve Is Assumed to Be