Question

Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?

Answer 1

Full question:

Why is persistent unemployment a possibility in the Keynesian model but NOT in the classical model?

A) The Keynesian model assumes that the level of real GDP is inflexible.

B) The Keynesian model assumes that people work for motives other than those of earning an income for themselves and supporting a family.

C) The Keynesian model assumes that workers can lose their jobs to foreign competition during economic downturns.

D) The Keynesian model assumes that nominal wages are inflexible downward.

Answer:

The Keynesian model assumes that nominal wages are inflexible downward - is persistent unemployment a possibility in the Keynesian model

Explanation:

The classical model is quite the usual microeconomic principles. Keynes claimed that the classical model is not common. In the classical model, the basis for the rationalizing is notional demand and supply, which implies market equilibrium. Keynes proposed the idea of aggregate demand, the overall demand for products and services in the economy.

Keynes supposed that the unemployment force persists regularly. Keynes was suspicious that the economic dominance of demand and supply drive the economy to a common equilibrium. Rising government spending or cutting taxes will boost aggregate demand.