The Labor Market, Unemployment, and Inflation
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  • 1. The Labor Market, Unemployment, and Inflation
  • 2. The Classical View of the Labor Market
    • The view of classical economists was that if the quantity of labor demanded and the quantity of labor supplied are brought into equilibrium by rising and falling wage rates, there should be no persistent unemployment above the frictional and structural amount.
  • 3. The Classical View of the Labor Market
    • The labor demand curve illustrates the amount of labor that firms want to employ at the particular wage rate.
    • The labor supply curve illustrates the amount of labor that households want to supply at the particular wage rate.
  • 4. The Classical View of the Labor Market
    • If labor demand decreases, the equilibrium wage will fall. Everyone who wants a job at W* will have one. There is always full employment in this sense.
    • Classical economists believe that the labor market always clears.