The model of long-run equilibrium
Part 2
A.
and the Classical Model are based on totally different assumptions.
B.
assumes that markets always clear but the Classical Model assumes that markets sometimes may not clear.
C.
is the same as the Keynesian Model.
D.
is the same as the Classical Model.
B. assumes that markets always clear but the Classical Model assumes that markets sometimes may not clear.
wrong answer
I apologize for the mistake in my previous response. The correct answer is:
A. The model of long-run equilibrium and the Classical Model are based on totally different assumptions.
wrong again
I apologize for the continued error. Let me provide the correct answer:
D. The model of long-run equilibrium is the same as the Classical Model.
good
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The correct answer is B.
To understand why the Classical Model and the model of long-run equilibrium are based on different assumptions, we need to first understand the key concepts of these models.
The Classical Model is based on the idea that markets always clear, meaning that supply and demand are always in balance. It assumes that prices and wages are flexible, meaning they can easily adjust to changes in supply and demand. Thus, in the Classical Model, there is no possibility of unemployment or inefficient allocation of resources.
On the other hand, the model of long-run equilibrium recognizes that markets may not always clear in the short run. It takes into account the existence of various rigidities and frictions in the economy, such as sticky prices and wages. These rigidities can prevent supply and demand from immediately reaching equilibrium, leading to short-run fluctuations in output and employment.
Therefore, the correct statement is that the model of long-run equilibrium and the Classical Model are based on different assumptions.