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# Why do new classical economists argue that in the long run aggregate demand can only affect...

Why do new classical economists argue that in the long run aggregate demand can only affect the price level? Use a diagram to illustrate your answer.

Classical economist argue that economy opeartes at its full employment level where all resources are working at its full efficient level. It shows that output supplied is economy is maximum given the resources which makes aggregate supply curve vertical while aggregate demand is downward sloping as usual. Assume initial demand curve is AD while supply curve is AS. When aggregate demand changes to AD1, only price level rises to P1 from P while output remains same at Y*.

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