Question

Classical economists thought that

A.
flexible wages and prices were the principal causes of recessions.
B.
​price, wage, and interest rate flexibility can quickly cure any tendencies for a recession.
C.
the Great Depression confirmed their view of the business cycle.
D.
government policies and spending were needed to keep the economy at full employment.

Answer 1

[AI-generated answer — Bot]

B. price, wage, and interest rate flexibility can quickly cure any tendencies for a recession.

Answer 2

[AI-generated answer — Step-by-Step Bot]

The correct answer is D. Classical economists believed that government policies and spending were needed to keep the economy at full employment. They argued that the economy would naturally tend towards full employment in the long run, but short-run fluctuations like recessions and depressions could occur due to various factors. They believed that government intervention, such as fiscal and monetary policies, was necessary to counteract these fluctuations and maintain stability in the economy.