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.

---

Definitions:

Distinctiveness

A principle suggesting that an event or object is memorable or noticeable because it differs significantly from other events or objects.

Consistency

The principle of maintaining the same attitudes, beliefs, and behaviors over time, which contributes to the predictability and stability of one's actions.

Neuroticism

A personality trait characterized by a long-term tendency to be in a negative emotional state, including feelings of anxiety, depression, and emotional instability.

Mental Illnesses

Disorders that affect an individual's mood, thinking, and behavior, examples include depression, anxiety disorders, schizophrenia, and bipolar disorder.