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Price Flexibility Plays a Key Role in the Classical Model

question 66

Essay

Price flexibility plays a key role in the classical model by ensuring that the markets reach equilibrium. a. Explain which price adjusts to bring equilibrium in the labor market. Describe how the price adjusts when demand exceeds supply in this market.
b. Explain which price adjusts to bring equilibrium in the loanable funds market. Describe how the price adjusts when supply exceeds demand in this market.


Definitions:

Closed-ended Research

A research approach that uses structured questions with predetermined response options in surveys or questionnaires.

Open-ended Research

A research approach that allows for the collection of detailed, qualitative data without limiting respondents to predetermined answers.

Explanation

Providing reasons for how or why something occurs, often involves detailing cause-and-effect relationships.

Hypothesis

A suggested explanation for an observed occurrence, offered as a foundation for additional exploration.

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