If a macroeconomic model consists of upward-sloping short-run aggregate supply and downward-sloping aggregate demand,can it possibly generate a constant real GDP with no business cycles over time?
A)No,only a vertical short-run aggregate supply curve can produce that result.
B)No,only a horizontal short-run aggregate supply curve can produce that result.
C)Yes,but the short-run aggregate supply curve must never shift.
D)Yes,if the aggregate demand and short-run aggregate supply curves shift in perfect unison.

Question

Quizplus · Accepted Answer

Yes, if the aggregate demand and short-run aggregate supply curves shift in perfect unison, it is possible to maintain a constant real GDP over time without business cycles. This scenario implies that any changes in aggregate demand are matched by equivalent changes in aggregate supply, thus preventing fluctuations in the level of output and prices.

If a Macroeconomic Model Consists of Upward-Sloping Short-Run Aggregate Supply