Which one of the following statements is NOT true?
A) The classical model assumes that people suffer from money illusion.
B) The classical model assumes that people are motivated by self-interest.
C) The classical model assumes that pure competition exists.
D) The classical model assumes that no single seller of a commodity can affect its price.

Question

Quizplus · Accepted Answer

The classical model does not assume that people suffer from money illusion. Instead, it assumes that people are rational and adjust their expectations based on changes in the economy, including changes in the supply and demand for money. Money illusion is a phenomenon where people mistakenly evaluate their purchasing power based on nominal values rather than real values. The classical model assumes that people understand the difference between nominal and real values and adjust their behavior accordingly.

Which One of the Following Statements Is NOT True