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Homework answers / question archive / Which of the following is not one of the features of the Neo-Classical macroeconomic model? A) All markets are characterized by perfect competition B) Wages and prices are fully flexible C) Total production is determined by aggregate demand D) Consumption is a function of interest rate
Which of the following is not one of the features of the Neo-Classical macroeconomic model?
A) All markets are characterized by perfect competition
B) Wages and prices are fully flexible
C) Total production is determined by aggregate demand
D) Consumption is a function of interest rate
Answer: Options A & D
Explanation:
In the Neo-Classical macroeconomic model, investment is a function of the interest rate and not consumption. Consumption is a function of price, taste, and preferences. Furthermore, in a Neo-Classical macroeconomic model, markets are not only characterized by perfect competition, but there are also other market characteristics like pure competition, monopolistic competition, oligopoly, and monopoly.
Therefore, options A and D are not one of the features of the Neo-Classical macroeconomic model. Options B and C are among the features of the Neo-Classical macroeconomic model, in which wages and prices are fully flexible because of the influence of the forces of demand and supply, and total production is determined by aggregate demand.