“In the classical model, the equilibrium level of real Gross Domestic

“In the classical model, the equilibrium level of real Gross Domestic Product (GDP) is completely supply-determined.” Do you agree or disagree? Why?

What will be an ideal response?

ANSWER

Agree. The long-run aggregate supply curve is vertical, so the equilibrium level of real Gross Domestic Product (GDP) is determined by the location of the aggregate supply curve. Shifts in aggregate demand affect only the price level.