Why Is Wage and Price Flexibility an Important Assumption of the Classical

question 88

Multiple Choice

Why is wage and price flexibility an important assumption of the classical model?

• A) Flexible wages and prices guarantee that there will be no scarcity.
• B) Flexible wages and prices allow business firms to fool their workers through the money illusion.
• C) Flexible wages and prices allow business firms to fool their customers through the money illusion.
• D) Flexible wages and prices allow markets to reach equilibrium.

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Definitions:

Successive Stage Theory

A concept in development that suggests entities go through a series of distinct and chronological stages or phases as they evolve or progress.

Stages of Development

The concept of progressive phases individuals go through during their psychological, physical, or social maturation process.

Interpersonal Attraction

The force that draws individuals together, leading to friendships, romantic relationships, or other forms of social connections.

Cohesion

The degree to which members of a group are connected to each other, fostering unity and a sense of belonging.