Which of the following assumptions is crucial to the classical macroeconomic model's assertion that the economy has built-in forces that automatically eliminate unemployment and quickly move the economy to its potential level of real GDP?

Question

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The classical macroeconomic model assumes that wages and prices are flexible, meaning that they can easily adjust to changes in supply and demand. This assumption is crucial because it allows the economy to quickly clear any imbalances in the labor market and reach its potential level of real GDP. With flexible wages and prices, firms can easily adjust their prices in response to changes in demand, and workers can adjust their wages in response to changes in labor market conditions. This ensures that there is always a market-clearing wage that eliminates unemployment and allocates labor resources efficiently.

Which of the Following Assumptions Is Crucial to the Classical