Which of the following is consistent with the classical view of Say's law?
A) Saving increases by $2 billion and investment decreases by $2 billion.
B) Saving increases by $2 billion and consumption rises by $2 billion.
C) Saving increases by $2 billion,consumption decreases by $2 billion,and investment rises by something less than $2 billion.
D) Saving decreases by $2 billion and consumption decreases by more than $2 billion.
E) none of the above

Question

Quizplus · Accepted Answer

The classical view of Say's law states that supply creates its own demand. In other words, there can never be overproduction or oversupply in the economy because when resources are used to produce goods and services, the income earned by the producers will be used to purchase those goods and services. None of the options above align with this principle. Option A implies a decrease in overall demand, while option B suggests that there was an increase in consumption without any corresponding increase in production. Option C implies a decrease in overall demand, and option D implies a decrease in both consumption and saving, which is inconsistent with the classical view of Say's law.

Which of the Following Is Consistent with the Classical View