The flaw of the Classical model of the business cycle is that it
A)assumes away output fluctuations.
B)assumes complete wage rigidity.
C)assumes unrealistic fooling of workers.
D)requires procyclical wage movements and continuous labor market equilibrium.

Question

Quizplus · Accepted Answer

The Classical model of the business cycle is criticized for assuming away output fluctuations, essentially suggesting that the economy is always at or near full employment and that markets, including the labor market, clear through price and wage adjustments. This overlooks the possibility of significant output fluctuations and the reality of economic cycles.

The Flaw of the Classical Model of the Business Cycle