The classical model is a poor predictor of short-run economic fluctuations in part because it assumes that

Question

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The classical model assumes that the labor market always clears, meaning that the supply of labor equals the demand for labor at a given wage rate. However, in the short run, there can be instances where there is a surplus or shortage of labor, resulting in fluctuations in output and employment levels. Therefore, the assumption that the labor market always clears makes the classical model a poor predictor of short-run economic fluctuations.

The Classical Model Is a Poor Predictor of Short-Run Economic