What is price-wage rigid The iron law of wages is a proposed law of economics that asserts that real wages always tend, in the long run, toward the minimum wage necessary to sustain the life of the worker.The theory was first named by Ferdinand Lassalle in the mid-nineteenth century. Classical economists belief that prices and quantities adjust to the changes in the forces of supply and demand and that the economy produces its potential output in the long run. On the contrary, Keynesian economists believe because of price and wage rigidities the economy’s equilibrium output in the long run may be less than its potential output. One of the reasons why the Great Depression was so … (Keynesian economics is a justification for the ‘New Deal’ programmes of the 1930s.) Physics Chemistry Statistics Economics Accounting Computer Science. Chegg study. savings leads to investment spending, which increases output. Classical economics is a broad term that refers to the dominant school of thought for economics in the 18th and 19th centuries. The term neoclassical economics was coined in 1900. B. wages and prices were flexible, and as a result, the aggregate supply curve was vertical. Classical economists believe that the commodities markets will also always be in equilibrium, due to flexible prices. B) achieve full-employment output. Classical theory is the basis for Monetarism, which only concentrates on managing the money supply, through monetary policy. Question 1 2 out of 2 points Classical economists believe that when aggregate demand changes, the economy remains at full employment because: Selected Answer: a. prices are very flexible. 29) Most consider Scottish economist Adam Smith the … Fiscal Policy. The prices for the commodity in question, decrease, to equate the demand and supply and bring the situation back to equilibrium. C) degenerate into pure monopolies in most industries. This means that the state should refrain from creating too many rules and regulations. They say that if government intervention is minimal, citizens enjoy a higher standard of living. crucial to growth; a drain on demand After year 2 of the Great Recession, the United States began to experience _______ in real GDP and _______ in the unemployment rate. Answers: A. wages and prices were inflexible, and as a result, the aggregate supply curve was vertical. 29) Which of the following changes shifts the long-run aggregate supply curve to the right? D) suffer from extended periods of sustained unemployment. Question 2 2 out of 2 points Use the following graph to answer the questions that follow. According to the classical economists, _____.a) people will ... Get solutions . Understanding Neoclassical Economics . Followers of neo-classical economics believe strongly that markets must be free. Textbook Solutions Expert Q&A Study Pack Practice Learn NEW! Classical economists believe that savings is _____, while Keynesian economists believe that savings is _____. Find solutions for your homework or get textbooks Search. Classical economists belief that prices and quantities adjust to the changes in the forces of supply and demand and that the economy produces its potential output in the long run. On the contrary, Keynesian economists believe because of price and wage rigidities the economy’s equilibrium output in the long run may be less than its potential output. . Classical economics places little emphasis on the use of fiscal policy to manage aggregate demand. Classical economists believe that savings is crucial for economic growth because. 2. Keynesian economists believe that: the economy needs help in moving back to full employment. 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