The new classical interpretation of the economy suggests that

Question

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According to the new classical interpretation of the economy, the economy usually operates at the natural level of output, which is determined by technology, labor, and capital stock. In the long run, the economy will always return to the natural level of output even if there are fluctuations in output in the short run. Therefore, output is always equal to the natural level in the long run.

The New Classical Interpretation of the Economy Suggests That