A key assumption of the classical model is that
A) government intervention is important to get markets to clear
B) prices adjust until quantity supplied equals quantity demanded
C) markets never clear in the long run
D) demand adjusts in order to meet supply
E) prices remain constant and supply and demand adjust

Question

Quizplus · Accepted Answer

The classical model assumes that markets clear by adjusting prices until quantity supplied equals quantity demanded. This is often referred to as the "invisible hand" of the market, where self-interested individuals and firms interact in a competitive marketplace to determine economic outcomes without the need for government intervention.

A Key Assumption of the Classical Model Is That