Author Question: Why is wage and price flexibility an important assumption of the classical model? A) Flexible ... (Read 117 times)

Pineappleeh · **on:** Jun 29, 2018

Why is wage and price flexibility an important assumption of the classical model?

A) Flexible wages and prices guarantee that there will be no scarcity.
B) Flexible wages and prices allow business firms to fool their workers through the money illusion.
C) Flexible wages and prices allow business firms to fool their customers through the money illusion.
D) Flexible wages and prices allow markets to reach equilibrium.

Question 2

Some economists believe that deficit spending can impose a burden on future generations. Which of the following does NOT explain the burden?

A) Investment will be crowded out by an increase in current consumption.
B) Deficit spending that is allocated to purchases leads to long-term increases in real GDP.
C) Future generations will have a smaller capital stock that will reduce their wealth.
D) Future generations will have to be taxed at a higher rate.