Upgrade subject to access all content
During the recent 2008 financial crisis in the U.S. the economy was in a recessionary gap. Which of the following would have occurred if classical theory is correct?
Workers' wages would have risen substantially and caused the demand for labor to fall causing a spike in unemployment.
Workers' wages would have remained stagnant and we would have experienced a persistent recessionary gap.
Workers' wages would have fallen and stimulated enough demand for labor in order to restore employment to pre-crisis levels.
Workers' wages would have fallen but not enough to stimulate demand for labor resulting in a persistent recessionary gap.