Which of the following statements is true about the long-run and short-run aggregate supply curve in the classical model?
A) The long-run aggregate supply curve is vertical, and the short-run curve is horizontal.
B) The long-run aggregate supply curve is not defined, and the short run curve is vertical.
C) The long-run and short-run curves start out horizontal and eventually become vertical.
D) The long-run curve is vertical, and there is no short-run curve since all adjustments occur quickly.

Question

Quizplus · Accepted Answer

In the classical model, the long-run aggregate supply curve is vertical because it is assumed that the economy is always at full employment. There is no short-run curve in the classical model as it assumes that prices and wages adjust quickly to changes in demand.

Which of the Following Statements Is True About the Long-Run