Question
In the Classical model, what is the shape of the
Aggregate Supply (AS) curve in the long run, and why?Solution
In the Classical model, the long-run AS curve is vertical. This is because the Classical economists believe that output is determined by the supply of factors of production (labor, capital, and technology) and not by the price level. Prices and wages are flexible, and the economy is always at full employment. Therefore, changes in the price level do not affect the total output in the long run.
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