Macroeconomics
Macroeconomics
11th Edition
ISBN: 9781260506891
Author: Colander
Publisher: MCG
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Chapter 6, Problem 1QE
To determine

Classical point of view on depression.

Expert Solution & Answer
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Explanation of Solution

The classical economists’ emphasis the fact that free market leads to an efficient outcome and are self-regulating. They believe that there is wage-price flexibility, which help to maintain full employment in the economy. The classical economists believe that the labor unions have to eliminate; because they prevent the appropriate level of change in wage rate. As a result, the wage rate will reduce and unemployment will decrease, thereby depression will disappear. Thus, the classical economists consider depression as a political problem rather than an economic problem.

Economics Concept Introduction

Unemployment rate: Unemployment rate refers to the percentage of unemployed people to the labor force.

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