Use the figure below to answer the following question(s).
Figure 12-3

-Refer to Figure 12-3.If an economy is currently operating at Y₁,which of the following would a new classical economist be most likely to favor?

Question

Use the figure below to answer the following question(s).
Figure 12-3
 
-Refer to Figure 12-3.If an economy is currently operating at Y₁,which of the following would a new classical economist be most likely to favor?

Quizplus · Accepted Answer

A new classical economist would believe in the self-corrective mechanism of the market and therefore advocate for no government action. They would argue that the economy will eventually return to its long-run equilibrium at Yn through adjustment in prices and wages. Any government intervention, such as changes in taxes and expenditures, would only cause inefficiencies and distortions in the market. Therefore, the correct answer is D, no government action and reliance on the self-corrective mechanism.

Use the Figure Below to Answer the Following Question(s)