The classical macroeconomic model argues that the economy has built-in forces that automatically eliminate unemployment and quickly move the economy to its full employment level of real GDP.Which assumption is critical to this argument?

Question

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The assumption of flexible wages and prices is critical to the classical macroeconomic model's argument that the economy will automatically eliminate unemployment and quickly move to its full employment level of real GDP. This assumption means that if there is a surplus of workers or goods, wages and prices will adjust downward, leading to increased demand and ultimately a return to full employment.

The Classical Macroeconomic Model Argues That the Economy Has Built-In