Which one of the following statements is true?
A) The classical model cannot explain periods of prolonged unemployment. B) The Keynesian model cannot explain periods of prolonged unemployment. C) The Keynesian model assumes complete flexibility of wages and prices. D) The Keynesian model shows that the level of real GDP is supply-determined.
All the following are assumptions of the classical model EXCEPT
A) pure competition exists. B) buyers and sellers react to nominal money prices rather than to relative prices. C) people are motivated by self-interest. D) wages and prices are flexible.