A fundamental feature of early classical macroeconomics is that
A) aggregate demand and aggregate income are usually unequal.
B) prices of inputs and outputs are relatively rigid.
C) the economy's level of employment can remain substantially below its natural level over a prolonged period of time.
D) the economy can achieve full employment on its own, though there could be temporary periods in which employment falls below the natural level.

Question

Quizplus · Accepted Answer

Early classical macroeconomics believed in the concept of the natural rate of unemployment and the economy's ability to achieve full employment on its own in the long run, even though temporary fluctuations may occur. They also believed in the flexibility of prices and wages to adjust and clear markets. Therefore, option D is the correct choice. Options A and C are incorrect because classical economists believed that aggregate demand and aggregate income are always equal in the long run and that the economy will always tend towards full employment unless there are external factors preventing it. Option B is also not correct as classical economists believed in the flexibility and adjustability of prices and wages.

A Fundamental Feature of Early Classical Macroeconomics Is That