Answer to Question #303645 in Macroeconomics for Anila

Question

Explain why classical theiruests beloved that there would be no long term involuntary un employment

Answer 1

Savings, according to classical thought, are merely another type of expenditure; all money is split between consumption and investment, they believed. There is no reason to be concerned about a disruption in the economy's income stream. As a result, no involuntary overproduction or unemployment is possible.

The classical economists always believed that the economy was in a state of employment. According to them, full employment equilibrium was the typical state of an economy.

They thought that anything less than full employment was unusual. There are no deviations from full employment equilibrium, according to classical theory, and even if there are, there is always a trend to return to full employment.