Verified answer

F

True. In classical view, prices adjust so quickly, it is a model usually used to consider the long run effect. For example, in the short run, any effect, such as the the increase in money supply, which is short run and dosen't change change ur full employment level, will be adjusted so quickly back to the full employment level. Supply shocks , such as technololy advance and long run accumulation of capital stocks, and anything that increases the marginal product of labor or marginal product of capital, will induce permanent effect on a classical model, thus shifting your full employment line in your classical model to the right of the original one. That means the production capacity of the entire economy has been increased. Any adverse supply shocks, verse visa.