In the classical model,a temporary increase in government purchases causes the new equilibrium to have
A)more employment and a lower real wage than before.
B)more employment and a higher real wage than before.
C)less employment and a lower real wage than before.
D)less employment and a higher real wage than before.

Question

Quizplus · Accepted Answer

In the classical model, a temporary increase in government purchases leads to more employment due to increased demand for goods and services. However, it also results in a lower real wage because the supply of labor increases as more people are willing to work at the current wage rates, leading to downward pressure on real wages.

In the Classical Model,a Temporary Increase in Government Purchases Causes