According to the classical economists, A. unemployment is caused by too little spending. B. the amount households plan to save is determined primarily by their wage. C. increasing government spending is the most reliable method of restoring full employment. D. the interest rate will ensure that the amount households plan to save will equal the amount businesses desire to invest.

Question

Social Studies

Patricia

11 November, 08:39

According to the classical economists, A. unemployment is caused by too little spending. B. the amount households plan to save is determined primarily by their wage. C. increasing government spending is the most reliable method of restoring full employment. D. the interest rate will ensure that the amount households plan to save will equal the amount businesses desire to invest.

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Answers (1)

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Jalen Frye · Answer 1

The answer is D. The interest rate will ensure that the amount households plan to save will equal the amount businesses desire to invest.

Explanation:

The Classical school's economy, which is considered the first school in terms of economy, establishes that markets have a better performance when they are alone, it means that there is a small role of the government. This approach considers that markets have the appropriate efficiency to play an important role in economic development.

Markets should work without any intervention because of the price mechanism and how it acts like an 'invisible hand' to assign resources in the places where they can be used adequately.