If the short-run aggregate supply curve is assumed to be horizontal and there are no international capital flows, then the big, comprehensive model in the appendix to Chapter 14 corresponds to which of the following special cases?
A)classical closed economy
B)aggregate demand and aggregate supply
C)IS-LM model
D)Mundell-Fleming model with floating exchange rate

Question

Quizplus · Accepted Answer

The IS-LM model is a framework that assumes a horizontal short-run aggregate supply curve, indicating that prices are fixed in the short run, and there are no international capital flows, making it a closed economy model.

If the Short-Run Aggregate Supply Curve Is Assumed to Be