If We Compare the Classical Model with the Imperfect-Information Model

question 9

Multiple Choice

If we compare the classical model with the imperfect-information model of the aggregate supply curve by Lucas, we can conclude that

• A)deviations from the full-employment level of output are possible in both models
• B)there is never any deviation from full employment in either of the models since both assume flexible wages
• C)in both cases nominal wages and prices always change proportionally, even in the short run, and therefore markets always clear immediately
• D)only the Lucas model explains why wages tend to be rigid even over an extended time period
• E)none of the above

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Definitions:

Bacteria

Microscopic, single-celled organisms found in virtually all environments, both harmful and beneficial to humans.

Lord Kelvin

A title for William Thomson, a prominent 19th-century physicist known for his work in thermodynamics and for developing the Kelvin scale of temperature.

Million Years Old

A term used to describe the age of geological formations, fossils, or the time since evolutionary events, measured in millions of years.

Thousand Years Old

Describes an object, organism, or structure that has existed for approximately one millennium.