Question

lassical economists argued that A. a flexible interest rate would make saving equal to investment. B. there would always be an excess of saving over investment. C. workers had money illusion. D. excess savings would create unemployment.

Answer 1

Answer: A. a flexible interest rate would make saving equal to investment.

Explanation:

Classical economists believe in an invisible hand correcting the economy and so to them price, wages and interest rates are flexible.

They believe that when the interest rate is flexible, it will be able to adjust to prevailing market conditions such that it would entice people to save more which would then be invested in the economy thereby making investment equal to savings.