A key assumption in the classical model is
A) sticky wages.
B) pure competition.
C) sticky prices.
D) the government's ability to stabilize the economy.

Question

Quizplus · Accepted Answer

The classical model assumes pure competition, meaning that there are many buyers and sellers in the market and no single entity can influence market prices. This assumption is based on the idea that in a perfectly competitive market, the price of goods and services will be determined solely by supply and demand, and there will be no need for government intervention in the economy. The classical model does not assume that wages or prices are sticky, or that the government can effectively stabilize the economy.

A Key Assumption in the Classical Model Is