In the classical model, aggregate demand and aggregate supply will
A) not exist.
B) intersect at less than full employment.
C) intersect at the point of full employment.
D) not intersect.

Question

Quizplus · Accepted Answer

In the classical model, it is assumed that the economy operates at full employment in the long run, where aggregate demand and aggregate supply intersect. This is because the classical model assumes that wages and prices are flexible and will adjust to ensure that the economy reaches full employment in the long run. Therefore, the intersection between aggregate demand and aggregate supply occurs at the point of full employment.

In the Classical Model, Aggregate Demand and Aggregate Supply Will