The classical school of economics:
A) emphasizes the short run.
B) emphasizes the flexibility of wages and prices.
C) has a problem with potential output, since potential output cannot be achieved without active policy.
D) advocates the use of discretionary fiscal policy.

Question

Quizplus · Accepted Answer

The classical school of economics emphasizes the flexibility of wages and prices, which suggests that markets have a self-correcting mechanism that can restore equilibrium in the economy in the long-run without the need for government intervention. It does not focus on the short run or advocate for discretionary fiscal policy. Additionally, while potential output is not a major concern for the classical school, it does not necessarily require active policy to achieve.

The Classical School of Economics