Classical economists believe that:
A)the long-run aggregate supply curve is vertical, but the short-run aggregate supply curve is horizontal.
B)fiscal policy changes are best at controlling the business cycle.
C)increases in the money supply will increase output.
D)prices are flexible.

Question

Quizplus · Accepted Answer

Classical economists believe in the idea of a self-regulating market where prices are flexible and will naturally adjust to ensure that markets reach equilibrium. Therefore, they do not believe that fiscal policy changes are effective in controlling the business cycle. They also believe that in the long-run, changes in the money supply will only result in changes in the price level, and not output.

Classical Economists Believe That