The market clearing assumption is
A) a central assumption of the short-run macro model
B) the idea that prices in every market will adjust until quantity supplied and quantity demanded are equal
C) the idea that excess supply always leads to an increase in demand
D) the idea that markets only work when they are in equilibrium
E) believed by most economists today to be an unreasonable assumption

Question

Quizplus · Accepted Answer

The market clearing assumption is the idea that prices in every market will adjust until quantity supplied and quantity demanded are equal. This means that there will be no excess supply or demand in any market. It is a central assumption of the short-run macro model and is believed by most economists to be a reasonable assumption in the long run.

The Market Clearing Assumption Is