According to classical theory, any changes in aggregate demand will
A) lead to changes in the price level.
B) lead to changes in real Gross Domestic Product (GDP), but not in the price level.
C) lead to changes in both real Gross Domestic Product (GDP) and the price level.
D) have no affect on prices or real Gross Domestic Product (GDP).

Question

Quizplus · Accepted Answer

According to classical theory, changes in aggregate demand primarily affect the price level rather than real GDP, which is determined by supply-side factors like technology and resources. The classical view holds that the economy is always at or rapidly returns to full employment, so demand changes mainly influence prices.

According to Classical Theory, Any Changes in Aggregate Demand Will