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Macroeconomics

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Key Assumptions of Classical Economic Theory

MACRO-KNVMN7

Which of the following is NOT a key assumption of Classical Economic Theory?

A

Prices are flexible and quickly adjust in order to clear market imbalances.

B

The economy’s production of goods and services create exactly enough income to purchase them.

C

There is a tendency for savings to be equal to investment.

D

Markets, although they have a tendency to correct imbalances, can take a long time to adjust providing a role for government intervention.