According to classical models, the level of employment is determined primarily by ?
Correct answer: B. prices and wages
- A. the level of aggregate demand for goods and services.
- B. prices and wages
- C. interest rates
- D. the quantity of money
Explanation
In the classical model, flexible prices and wages clear the labour market, so employment is determined primarily by price and wage adjustments. Aggregate demand affects the price level rather than setting employment in the long-run classical view.
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