Classical macroeconomics theory concludes that ultimately

A. Fiscal policy generates only quantity effects
B. erratic investment causes long business cycles
C. Functional finance cures excessive budget deficits
D. Natural state of the economy is at full employment

To determine the correct answer among the options provided, let's break down each statement and see which one aligns with classical macroeconomic theory.

A. Fiscal policy generates only quantity effects: Classical macroeconomics does acknowledge the role of fiscal policy in the economy. However, it does not suggest that fiscal policy has only a quantity effect. Classical theory recognizes that fiscal policy can have both quantity (output and employment) and price effects (inflation).

B. Erratic investment causes long business cycles: While investment is a key determinant of economic fluctuations, classical macroeconomics focuses more on factors such as technology shocks, changes in money supply, and aggregate demand shocks as drivers of business cycles. It doesn't specifically attribute long business cycles to erratic investment.

C. Functional finance cures excessive budget deficits: Functional finance is not a concept associated with classical macroeconomics. It refers to the idea that the government should focus on achieving specific economic goals (such as full employment and price stability) rather than aiming for a balanced budget. Classical macroeconomics, in contrast, emphasizes the importance of fiscal discipline and maintaining a balanced budget over the long run.

D. Natural state of the economy is at full employment: According to classical macroeconomics, the economy tends towards a natural state of full employment in the long run. This implies that any deviations from full employment are temporary and self-correcting in nature.

Based on the analysis above, the correct answer is D. Classical macroeconomics theory concludes that the natural state of the economy is at full employment.