Question
Which of the following statement is/are true regarding
classical theory of income and employment? 1. Classical economist believe that the economy needs fiscal policy 2. It describes economic growth in short run 3. According to this model, the wages are stickySolution
The classical theory of employment and output is a long run theory. It is based on two basic notions, viz. Say’s law and wage price flexibility. The classical economist believed that given wage price flexibility, there are automatic forces in the economic system that tends to maintain full employment and produce output at that level. Thus, they rule out the need of fiscal policy for correction of economy.
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