Classical economists believed that
A)government intervention was necessary to stabilize the economy.
B)movements away from the natural rate of output were only temporary.
C)monetary policy was ineffective.
D)monetary impotence would make fiscal policy necessary to bring the economy out of a depression.

Question

Quizplus · Accepted Answer

Classical economists believed in the concept of the natural rate of output, which is the level of output produced by the economy when all available resources are fully employed. They also believed that any deviations from this natural rate of output would be temporary and self-correcting in the long run, through the mechanism of market forces. Therefore, they did not believe that government intervention or monetary policy was necessary to stabilize the economy. They believed that the economy would always tend back towards its natural rate of output in the long run, without any government intervention.

Classical Economists Believed That