From a neoclassical view, which of the following is a true statement?
A. Lower wages will cause an economy-wide increase in the price of a key input.
B. Because wages are flexible, they are unaffected by high rates of unemployment.
C. A surge in aggregate demand ends up as a rise in output, but does not increase price levels.
D. The economy cannot sustain production above its potential GDP in the long run.
Answer:D
From a neoclassical view, which of the following is a true statement?
A. Lower wages will cause an economy-wide increase in the price of a key input. B. Because wages are flexible, they are unaffected by high rates of unemployment. C. A surge in aggregate demand ends up as a rise in output, but does not increase price levels. D. The economy cannot sustain production above its potential GDP in the long run.
Explanation: Type: Multiple Choice