Classical economists argued that
A) there would always be an excess of saving over investment.
B) workers had money illusion.
C) excess savings would create unemployment.
D) a flexible interest rate would make saving equal to investment.

Question

Quizplus · Accepted Answer

Classical economists believed that a flexible interest rate would ensure that saving equals investment, as interest rates would adjust to balance the two. They did not believe that excess saving would necessarily lead to unemployment, as this would be offset by increased investment. They also did not believe that workers had money illusion, as they understood the concept of real vs nominal wages.

Classical Economists Argued That