An economist develops a model that links aggregate demand to the level of output and employment. The model also incorporates how firms set prices and how workers' wage demands respond to the level of unemployment. However, the model assumes a constant price level. What is the most significant analytical weakness of this model when trying to understand the dynamics of a typical business cycle?

Completing the Business Cycle Model

Diagnosing an Incomplete Economic Model

Evaluating the Completeness of a Macroeconomic Model

A macroeconomic model that successfully explains how aggregate demand determines short-run output and how labor market conditions determine the equilibrium rate of unemployment provides a complete picture of business cycle fluctuations.