Question

According to classical economic theory, a market economy: Select one: a. is self-regulating b. will automatically adjust to the natural unemployment rate c. will automatically adjust to Natural Real GDP d. All of the above

Answer 1

Answer:

A. Is self regulating

Explanation:

The fundamental theory of the classical economy is that the market economy is self regulating. The classical economists believe that an economy is always capable of achieving real GDP, that is GDP when resources are fully employed. And that, time to time, when GDP falls below or exceed the real GDP, the market economy has self-adjustment mechanisms to bring it back to the real GDP level. Classical economists believes in self regulating democracies and capitalistic market developments.