Asked by Patel Fenil on Jul 17, 2024
Verified
Which of the following supports the classical theory of employment?
A) The interest rate will not always equalize savings and investment.
B) Not everything produced will necessarily be purchased.
C) Saving and investing are done by different people for different reasons.
D) Wages and prices are flexible downwards.
Classical Theory
A school of economic thought that emphasizes the role of free markets in regulating the economy and argues for minimal government intervention.
Employment
The condition of having paid work, or the process or business of hiring workers.
Savings
The portion of income not spent on current consumption, often set aside for future use or investment.
- Absorb the underlying theoretical contrasts between classical economics and Keynesian economics.
- Evaluate the implications of Keynesian and classical theories on employment and price flexibility.
Verified Answer
DP
Daisy PrattsJul 24, 2024
Final Answer :
D
Explanation :
The classical theory of employment states that wages and prices are flexible downwards, meaning they will adjust based on changes in the market to ensure employment remains at full capacity. This supports option D. Options A, B, and C suggest limitations or complications to the classical theory's assumptions of a self-correcting market equilibrium.
Learning Objectives
- Absorb the underlying theoretical contrasts between classical economics and Keynesian economics.
- Evaluate the implications of Keynesian and classical theories on employment and price flexibility.