Classical economists believe that a reason the aggregate supply curve is ________ is because people who are not working are those who have chosen not to work at the prevailing wage rate.

Question

Quizplus · Accepted Answer

Classical economists believed in the concept of full employment, meaning that everyone who wanted a job would have one at the prevailing wage rate. Therefore, the aggregate supply curve would be vertical at the full employment level of output, indicating that the economy has reached its maximum potential output level. Any increase in aggregate demand would only lead to higher prices, rather than an increase in output.

Classical Economists Believe That a Reason the Aggregate Supply Curve