The classical model of macroeconomics assumes ?
Correct answer: F. B and D
- A. wages and prices are sticky
- B. wages and prices are flexible
- C. the economy may operate below full capacity
- D. the economy is always at full capacity
- E. A and C
- F. B and D
Explanation
The classical model assumes flexible wages and prices, allowing markets to clear and the economy to operate at full employment or capacity. Thus both statements B and D are correct.
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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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