According to classical economists, market oriented economies could _____
A) never experience high unemployment.
B) experience high unemployment from time to time.
C) normalize toward potential GDP with discretionary fiscal policy.
D) normalize toward potential GDP with discretionary monetary policy.
E) never experience potential GDP.

Question

Quizplus · Accepted Answer

Classical economists believed in the concept of natural unemployment, meaning that some level of unemployment would always exist in a market-oriented economy due to factors such as frictional or structural unemployment. Therefore, option A and E are incorrect. While discretionary fiscal and monetary policies can be implemented to try to stabilize the economy, they are not guaranteed to bring the economy to potential GDP, so options C and D are also incorrect. Option B is the best choice as it reflects the classical view on unemployment in market-oriented economies.

According to Classical Economists, Market Oriented Economies Could _____