What is the expected outcome in the Classical Model when aggregate demand increases?

The Classical Model of economics operates under the assumption that markets are always clear, meaning supply will match demand in a competitive economy. When aggregate demand increases, according to the Classical Model, the economy reaches its full employment output level, which is determined by the labor force and technology, rather than demand.

As aggregate demand rises, this increase leads to upward pressure on the price level because the economy cannot produce more output in the short run; it is already operating at its maximum capacity. Hence, firms facing higher demand will raise prices instead of increasing output, resulting in inflationary pressures.

Consequently, the expected outcome of an increase in aggregate demand within the Classical Model is an increase in the price level while output remains unchanged. This reflects the notion that, in the long run, output is determined by real factors such as labor and capital, not by changes in demand.