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According to the classical theory of money, how is the aggregate supply (AS) represented?
According to the classical theory of money, how is the aggregate supply (AS) represented?
- As a vertical line indicating constant total outputs regardless of price levels (correct)
- As a downward-sloping line indicating decreasing total outputs with increasing price levels
- As a horizontal line indicating constant price levels regardless of total outputs
- As an upward-sloping line indicating increasing total outputs with increasing price levels
What does the classical theory assume about the flexibility of prices and wages?
What does the classical theory assume about the flexibility of prices and wages?
- They are flexible only in the short run but not in the long run
- They are completely flexible and can be determined by market forces (correct)
- They are rigid and cannot be determined by market forces
- They are completely inflexible and determined by government regulations
How does the classical theory explain the impact of changes in aggregate demand (AD) on prices and wages?
How does the classical theory explain the impact of changes in aggregate demand (AD) on prices and wages?
- Changes in AD have no impact on prices and wages
- Changes in AD only impact prices but not wages
- Changes in AD can impact prices and wages without changing aggregate supply (AS) (correct)
- Changes in AD can impact aggregate supply (AS) without impacting prices and wages
What is meant by 'there is no money illusion' according to the classical theory?
What is meant by 'there is no money illusion' according to the classical theory?
In the classical theory, what is indicated by 'supply creates its own demand'?
In the classical theory, what is indicated by 'supply creates its own demand'?
According to the classical theory, how do changes in demand curve upward affect the level of output (real GDP)?
According to the classical theory, how do changes in demand curve upward affect the level of output (real GDP)?
According to the classical theory, what happens to the aggregate supply (AS) when there is a change in the aggregate demand (AD)?
According to the classical theory, what happens to the aggregate supply (AS) when there is a change in the aggregate demand (AD)?
How does the classical theory explain the impact of changes in prices on wages?
How does the classical theory explain the impact of changes in prices on wages?
In the classical theory, what is the role of aggregate supply (AS) in determining the equilibrium point?
In the classical theory, what is the role of aggregate supply (AS) in determining the equilibrium point?
What is the effect of an upward shift in the demand curve on the level of output (real GDP) according to the classical theory?
What is the effect of an upward shift in the demand curve on the level of output (real GDP) according to the classical theory?
What happens when the aggregate demand (AD) shifts from AD1 to AD2 according to the classical theory?
What happens when the aggregate demand (AD) shifts from AD1 to AD2 according to the classical theory?
How does the market correct itself according to the classical theory?
How does the market correct itself according to the classical theory?
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