In the aggregate demand and supply model, the:
A) aggregate supply curve is horizontal at full-employment real GDP.
B) vertical axis measures real GDP.
C) vertical axis measures the overall price level.
D) horizontal axis measures the overall price level.

Question

Quizplus · Accepted Answer

The vertical axis in the aggregate demand and supply model measures the overall price level, while the horizontal axis measures real GDP. The aggregate supply curve is upward sloping in the short-run and becomes vertical at full-employment real GDP in the long-run.

In the Aggregate Demand and Supply Model, The