Validity of Say’s law and long-term unemployment according to classical economists.

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Answer 1

Question

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.

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Answer 2

Question

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.

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Answer 3

Question

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.

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Answer 4

Question

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.

Answer 6

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.

Answer 7

Chapter 8, Problem 1SQP

To determine

Validity of Say’s law and long-term unemployment according to classical economists.

Answer 8

Expert Solution & Answer

Explanation of Solution

The classical economists believe in price-wage flexibility. They state that underemployment and under consumption will not co-exist in the economy in the long run. When products are unsold in the market, it creates a surplus and this would induce the firms to reduce the price of the products. When the price reduces, it implies that the wage rate also decreases and the unemployed people would be willing to work at a lower wage rate. This implies that under consumption lead to an increase in the employment and a decrease in the rate of unemployment. Say’s law is valid as the price-wage flexibility facilitates the notion ‘supply creates its own demand’.