AD/AS analysis

• What is the nature of the classical LRAS curve?

  It is perfectly inelastic.
• What happens to national output when the AD curve shifts?

  Long run national output remains unchanged.
• What do classical economists believe about unemployment in the long run?

  There will be no unemployment.
• What is the effect of an increase in AD in the short run according to classicists?

  It increases both price and output.
• What happens to prices over time after an increase in AD?

  Prices will continue to rise.
• What does the economy do as it moves back to long-term equilibrium?

  Output has not changed.
• What is required to increase output in the long run?

  Increase the LRAS.
• What are the effects of changes in AD without a change in LRAS?

  They are only inflationary.