A key assumption in the classical model is
A)sticky wages.
B)pure competition exists.
C)sticky prices.
D)the government plays a major role in economic problems.

Question

Quizplus · Accepted Answer

The classical model assumes pure competition exists, meaning there are many buyers and sellers in the market and no single buyer or seller can influence the market price. This assumption is important for the classical model's prediction that markets will always move towards equilibrium. While sticky wages and sticky prices are also important concepts in macroeconomics, they are not key assumptions in the classical model. The classical model also assumes that the government plays a limited role in economic problems, so choice D is incorrect.

A Key Assumption in the Classical Model Is