The classical view believes that ________.
A)economies move slowly to their long run equilibrium levels
B)a rise in the quantity of money leads to increases in saving and investment
C)a rise in the quantity of money has no impact on economic activity
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The classical view believes that changes in the quantity of money have no long-run impact on real economic activity, as economies will eventually adjust to their long-run equilibrium levels regardless of changes in money supply. They also believe that saving and investment are determined by the real interest rate, not the quantity of money. Therefore, B is incorrect, as a rise in the quantity of money would not necessarily lead to increases in saving and investment. A is also incorrect, as this implies that the economy is not already at its long-run equilibrium level and will need to adjust to reach it, which goes against the classical view. D and E are also incorrect for the reasons listed above.

The Classical View Believes That ________