The assumption that labor markets clear makes it very easy for the classical model to explain recessions.

Name: The assumption that labor markets clear makes it very easy for the classical model to explain recessions.
Brand: Quizplus
Rating: 4.7 (37 reviews)

Question

Quizplus · Accepted Answer

The classical model assumes that labor markets clear, meaning supply equals demand, which implies full employment. This makes it difficult, not easy, for the model to explain recessions, as it does not account for unemployment or demand deficiencies.

The Assumption That Labor Markets Clear Makes It Very Easy