Question

Classical economists assumed that: Spending leakages exceed spending injections. Interest rate adjustment will cause business investment to equal consumer saving. The economy might experience persistent macro instability. No leakages would occur.

Answer 1

Answer: Interest rate adjustment will cause business investment to equal consumer saving.

Explanation: The classical economists argues that the market is always clear because price would adjust through the interactions that exist between demand and supply and since the market is self-regulating, there is no need to intervene in it. However, Classical economists assumed that interest rate adjustment will cause business investment to equal consumer saving.