The classical economists argued that
A. a market economy will not experience unemployment.
B. if unemployment occurs it will cure itself because prices, wages, and interest rates will fall.
C. aggregate demand may not be large enough to take the entire supply of goods and services off the market.
D. if inflation occurs it will cure itself because prices, wages, and interest rates will rise.
B. if unemployment occurs it will cure itself because prices, wages, and interest rates will fall.
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How might inflation, even if fully anticipated, prevent the classical dichotomy from holding, even in the long run?
What will be an ideal response?
Figure 10-6
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In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium
A. each firm will be producing a smaller output. B. the market price will rise to $20. C. the number of firms in the market will increase. D. All of these responses are correct.