Classical economists assume that
A)Spending leakages exceed spending injections.
B)Interest rate adjustment will cause business investment to equal consumer saving.
C)The economy might experience persistent macro instability.
D)No leakages would occur.

Question

Quizplus · Accepted Answer

Classical economists assume that in a market economy, interest rate adjustments will bring about equilibrium between saving and investment. As a result, business investment will be equal to consumer saving, and there would be no sustained macroeconomic instability. However, this assumption overlooks the possibility of leakages, particularly saving leakages such as taxes or imports, which can disrupt the balance between saving and investment, and lead to macroeconomic instability.

Classical Economists Assume That