In the classical model,achieving a full-employment level of output
A) requires a modest amount of government intervention.
B) is a temporary state resulting from flexible wages and prices.
C) is possible because competition bids wage rates down to the point where everyone who really wants a job can have one.
D) is based on the assumption that there is no saving in the economy because all the income created is spent.
E) becomes more and more difficult to attain as labor-saving technology throws more and more workers into unemployment.

Question

Quizplus · Accepted Answer

The classical model assumes that competition in the labor market will bid wages down to a level where everyone who wants a job can have one. This implies that there is no involuntary unemployment in the economy at the full-employment level of output. The classical model does not require any government intervention to achieve full employment.

In the Classical Model,achieving a Full-Employment Level of Output