An advocate of the classical model of the economy would claim that unemployment is created when the ____ is above its equilibrium level in the ______?
Correct answer: C. wage rate, labor market
- A. price level, aggregate economy
- B. tax rate, government budget
- C. wage rate, labor market
- D. interest rate, market for loanable funds
Explanation
In the classical labor market, a wage above the equilibrium level creates excess labor supply, so more people want jobs than firms want to hire. This surplus of labor is unemployment.
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