What is true of the aggregate supply curve in the classical model?
A) The aggregate supply curve is downward sloping.
B) The aggregate supply curve is horizontal.
C) The aggregate supply curve is vertical.
D) The aggregate supply curve is not determined by the level of employment.

Question

Quizplus · Accepted Answer

In the classical model, the aggregate supply curve is vertical because it is determined by the economy's potential output, which depends on the available factors of production and technology. Therefore, changes in aggregate demand only affect the price level, not the level of output and employment.

What Is True of the Aggregate Supply Curve in the Classical