AS1 is classical because it reflects less wage and price flexibility. AS1 could be either classical or Keynesian because it reflects greater wage flexibility but less price flexibility. The price level 13. Intermediate goods 14. Businesses pay wages, rent, interest, and profits to households in return for use of factors of production.
Businesses purchase goods and services from households in return for money payments.
Households pay wages, rent, interest, and profits to businesses in return for use of factors of production. The relationship between households and businesses exists only in a traditional society. The relationship between households and businesses exists only in a command economy. An increase in business firms' purchases of capital equipment from retained earnings 16. No change 18.