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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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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