A classical model of the economy predicts
A) full employment in the long run.
B) a negative unemployment rate whenever the economy is in equilibrium.
C) the same unemployment rates as the Keynesian model.
D) cyclical changes in the unemployment rate.

Question

Quizplus · Accepted Answer

The classical model assumes that market forces such as supply and demand will lead to full employment in the long run. Therefore, answer choice A is correct. Answer choices B and D are incorrect because the classical model does not predict negative unemployment or cyclical changes in unemployment rate. Answer choice C is also incorrect because the Keynesian model and classical model have different assumptions and predictions about the economy.

A Classical Model of the Economy Predicts