According to the Classical model, unemployment
A) could not persist because wages would rise to eliminate the excess supply of labor.
B) could not persist because wages would fall to eliminate the excess supply of labor.
C) could be eliminated through fiscal and monetary policies.
D) could be eliminated only through government intervention.

Question

Quizplus · Accepted Answer

According to the Classical model, wages are flexible and will adjust to equilibrium levels, so any excess supply of labor (i.e. unemployment) would result in a decrease in wages to eliminate the excess supply. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they all involve some form of government intervention or policy action to address unemployment, which is outside of the Classical model's framework.

According to the Classical Model, Unemployment