The Classical Economists believed that
A)the cure for wage sickness was the passage of labor laws requiring the indexing of wages to changes in normal GDP.
B)the cure for unemployment was the passage of labor laws requiring the indexing of wages to changes in nominal GDP.
C)the cure for wage stickiness was to remedy market inefficiencies.
D)unemployment required active government intervention to manipulate AD.

Question

Quizplus · Accepted Answer

Classical economists believed that markets were self-regulating and that price and wage stickiness was caused by market inefficiencies. They believed that the cure for wage stickiness was to address these inefficiencies, such as monopoly power or information asymmetries, in order to allow markets to clear and wages to adjust to their equilibrium level. They did not advocate for government intervention in setting or indexing wages.

The Classical Economists Believed That