Mainstream economists question the new classical assumption that
A) excessive growth of the money supply is a cause of inﬂation.
B) the price level is determined by aggregate demand and aggregate supply.
C) demand creates its own supply.
D) wages and prices are equally ﬂexible upward and downward.

Question

Quizplus · Accepted Answer

Mainstream economists question the assumption that wages and prices are equally flexible upward and downward because they believe that in reality, downward wage and price rigidity can create disequilibrium in the labor market and lead to unemployment.

Mainstream Economists Question the New Classical Assumption That