In a classical model
A) equilibrium real GDP is supply determined.
B) equilibrium real GDP is determined by the government.
C) equilibrium real GDP is determined by both aggregate supply and aggregate demand.
D) equilibrium real GDP is neither determined by aggregate supply nor by aggregate demand.

Question

Quizplus · Accepted Answer

In a classical model, equilibrium real GDP is supply determined because the classical economists believed that the economy would automatically adjust to full employment through the operation of market forces, without the need for government intervention in the form of fiscal or monetary policy. Therefore, equilibrium real GDP is determined by the level of aggregate supply.

In a Classical Model