Answer to Question #213633 in Macroeconomics for Shagun

Question

Why AD is never a constraint in the classical model?

Answer 1

The classical model assumes that supply creases its own demand (Say's law). So no matter how much supply is there it will always be demanded and the supply will be finished. Classical economists say that the production will generate income for people in the economy and with that income, they will demand the goods and services. Also, the production of one good requires other goods as well so all the goods will be demanded either by any firm or an individual. 

So the demand is not a constraint in the classical model. There will be no deficiency in aggregate demand and whatever is produced will be demanded.