The hands-off view of the classical school rests on which of the following two simple propositions about markets?
A) Demand creates its own supply and markets are basically competitive.
B) Markets are basically competitive and prices are flexible.
C) Market failure occurs and prices are rigid.
D) Wages are sticky downward and market failure is inevitable.

Question

Quizplus · Accepted Answer

The hands-off or laissez-faire view of the classical school rests on the two simple propositions that markets are basically competitive and prices are flexible. This means that the government should not interfere with the market since it will naturally find its own equilibrium. The concept of demand creating its own supply is associated with Say's Law, which is also a part of the classical school but not the focus of the hands-off view. Choices C and D contradict the hands-off view by suggesting market failure and rigid wages, respectively.

The Hands-Off View of the Classical School Rests on Which