According to classical economics:
A)real GDP is determined by aggregate demand, while the equilibrium price level is determined by aggregate supply.
B)both real GDP and price level are determined by aggregate demand.
C)both real GDP and price level are determined by aggregate supply.
D)real GDP is determined by aggregate supply, while the equilibrium price level is determined by aggregate demand.
E)price level cannot be changed as prices and wages are perfectly rigid.

Question

Quizplus · Accepted Answer

According to classical economics, real GDP is determined by aggregate supply, as it is based on the economy's production capacity and the factors of production such as labor and capital. On the other hand, the equilibrium price level is determined by aggregate demand, as it represents the level of spending and purchasing power in the economy. Thus, the correct choice is D - real GDP is determined by aggregate supply, while the equilibrium price level is determined by aggregate demand.

According to Classical Economics