Why is there NO persistent unemployment in the classical model?
A) The wage level adjusts to eliminate unemployment.
B) The interest rate adjusts to eliminate unemployment.
C) The rate of economic growth is always high enough to allow those who want to work at current wages to find jobs.
D) Unionization creates job security for workers.

Question

Quizplus · Accepted Answer

In the classical model, wages are flexible and will adjust to clear the labor market. If there is excess labor supply (unemployment), wages will fall until employers are willing to hire all the available workers. Therefore, persistent unemployment is not possible in the classical model.

Why Is There NO Persistent Unemployment in the Classical Model