In the classical model, an increasing demand for labor will
a. cause an expansion with higher employment and a higher real wage.
b. cause a shortage of labor because the labor market always clears.
c. cause a recession with lower employment and a lower real wage.
d. cause a recession because wages are fixed in the short run.
e. cause an expansion with lower employment and a higher real wage.
A
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Which of the following statements is true of models?
A) The predictions of a model are referred to as data. B) A model is formulated after developing a hypothesis. C) Models are always based on assumptions that are known to be true. D) It is more important for a model to be simple and useful than to be precisely accurate.
The figure above shows the demand for and supply of labor of students in Smallville. If the minimum wage is set at $6 per hour, how many hours of students' labor are unemployed?
A) 12,000 hours B) 9,000 hours C) 6,000 hours D) 0 hours