Answer to Question #18431 in Macroeconomics for Spanky

Question

Make a comparison and show differences between the fixed nominal wage, the fixed price and the classical model. Write if money is neutral and the cyclicality of salaries and prices and why. Which result is agreeable with the Great Depression?

Answer 1

Classical model is determined that nominal wages are fixed and prices are also fixed. Such stable situation does not have chance for development because it has no investments to come from. In this case money is only source that circulate between salary and prices.