What was a fundamental belief of classical and neoclassical economic schools prior to Keynesianism?
Understand the Problem
The question is asking about the fundamental beliefs of classical and neoclassical economic schools before the advent of Keynesian economics. It specifically seeks to identify which option reflects those beliefs regarding government intervention and market correction.
Answer
Markets are self-regulating, adjusting on their own without government intervention.
A fundamental belief of classical and neoclassical economic schools prior to Keynesianism was that markets are self-regulating, meaning prices and wages naturally adjust to restore equilibrium without the need for government intervention.
Answer for screen readers
A fundamental belief of classical and neoclassical economic schools prior to Keynesianism was that markets are self-regulating, meaning prices and wages naturally adjust to restore equilibrium without the need for government intervention.
More Information
Both classical and neoclassical economics believed in the efficiency of free markets, a stance that was significantly challenged by Keynesian economics, which advocated for active government intervention to manage economic cycles.
Tips
A common mistake is assuming these schools supported significant government intervention, which is a key contrast between them and Keynesianism.
Sources
- Keynesian vs. Classical Economic Model | Overview & Differences - study.com
- Neoclassical Economics: What It Is and Why It's Important - investopedia.com
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