In the classical model, what adjusts to eliminate any unemployment of labor in the economy?
A) the average price level
B) the interest rate
C) the real rental price of capital
D) the real wage

Question

Quizplus · Accepted Answer

In the classical model, the real wage adjusts to eliminate any unemployment of labor in the economy. As real wages fall, more firms are able to hire workers, increasing the demand for labor and reducing unemployment. Conversely, as real wages rise, more workers are willing to work, increasing the supply of labor and reducing unemployment.

In the Classical Model, What Adjusts to Eliminate Any Unemployment