Top Hat 8.1

All of the following are associated with the classical model EXCEPT:

markets are likely to be guided as if by "an invisible hand" to lead to outcomes that are efficient for sellers but inefficient for buyers.

In the classical credit market (market for loanable funds), if the interest rate is above the equilibrium interest rate:

there is a surplus of loanable funds and the interest rate will fall.

The beginning of the classical model is most often associated with:

Adam Smith.

The Wealth of Nations addresses the economic concepts of:

All of the above are concepts addressed in The Wealth of Nations

Which of the following is NOT an assumption of the classical model?

Unemployment does not occur

Adam Smith's notion of the invisible hand is best summarized by which of the following statements?

When individuals are allowed to pursue their own self-interest in their economic interactions, resources will naturally flow to their highest-valued use

In modern terms, the wealth of a nation, is measured by:

gross domestic product.

In the classical labor market, a surplus of labor:

is eliminated by falling wages.

If Say's Law is true, then:

supply creates own demand.

The Classical model concludes that government should:

take a laissez-faire approach to macroeconomic policy because a market economy is self-regulating.