Final answer:
The SRAS curve is vertical in the neoclassical zone due to full employment, where an economy's output is at its maximum sustainable level, and resources are fully utilized, making it inelastic to changes in the price level. We are in the neoclassical zone when the unemployment rate is at the natural rate, indicating that the economy is at its potential output.
Step-by-step explanation:
The short-run aggregate supply (SRAS) curve might be vertical in the neoclassical zone because, at full employment, an economy's output is at its maximum sustainable level, and increases in the price level do not lead to increases in output. This is due to the fact that all resources are fully utilized, and there is no excess capacity. Therefore, the SRAS in the neoclassical zone is perfectly inelastic.
To determine if we are in the neoclassical zone of the AS, we should look for characteristics of full employment in the economy. This includes a situation where unemployment is at the natural rate, indicating that the economy is producing at its potential output. When at full employment, any changes in the aggregate demand lead to changes in the price level rather than output, reflecting the vertical SRAS.