High School

What is the view of classical macroeconomics?

According to classical macroeconomics, _______.

Classical macroeconomics predicted that the Great Depression _______.

Answer :

Final answer:

Classical macroeconomics believed in the self-correcting nature of the economy, but the Great Depression challenged this view, leading to the rise of Keynesian economics.

Explanation:

The basic assumptions of the classical school of thought in macroeconomics, prevailing before the Great Depression, emphasized the economy's ability to reach full employment equilibrium on its own.

**The severity and duration of the Great Depression** dealt a significant blow to this view as the economy struggled to self-correct, leading to mass unemployment and prolonged economic downturn.

Keynesian economics emerged as a contrasting perspective advocating for active government intervention to stabilize the economy during recessions, shifting the mainstream economic thought away from classical views.