A key assumption in the classical model is
A) sticky wages.
B) pure competition exists.
C) sticky prices.
D) the government plays a major role in economic problems.
B
You might also like to view...
When economists say wages are "sticky," they mean that they:
A. are slow to adjust to changes in the economy, and can cause unemployment. B. stick to current market trends, and adjust to equilibrium when changes in the economy occur. C. get stuck behind current market trends, and follow a typical two-week lag with changes in the economy. D. lead market trends, and other variables will stick to the wage rate and follow it closely.
When is a deadweight loss the greatest?
a. in a highly efficient market b. in a market with no tax c. far away from equilibrium d. at equilibrium
Taxes and needs-tested spending work as automatic fiscal policy to dampen the business cycle because taxes _______ during an expansion, and needs-tested spending _______ during a recession.
Fill in the blank(s) with the appropriate word(s).
A characteristic of long-run equilibrium is the economy is producing its potential output. This is:
A. defined as using 80 percent of the economy's resources at any time. B. the level of output consistent with an unemployment rate of 7.5%. C. the level of output the economy produces when its resources are used at normal rates. D. the maximum level of output the economy could produce at any time.