A Weakness of the Classical Model Is

question 43

Multiple Choice

A weakness of the classical model is

• A) the quality of its explanations for long-run movements of the economy
• B) its confusion between the long and short run
• C) its assumption that the labor market always clears
• D) its treatment of crowding out in the long run
• E) its inadequate attention to the long run

Distinguish between complements and substitutes in consumption and their market effects.

Analyze the impact of technological advancements on supply and market equilibrium.

Understand the relationship between income changes and demand for normal and inferior goods.

Evaluate how changes in production costs affect market equilibrium.

---

Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Lease Payments

Periodic payments made by a lessee to a lessor for the use of an asset over a specified lease term.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows.

Capital Budgeting

The process of planning and managing a firm’s investment in long-term assets.