One of the most important tenets of classical economics is that market economies automatically tend toward full employment. This belief is largely based on the principle Say’s Law. This principle assumes that a rational individual will spend their money expediently and not hoard money. What this idea has to add to the classical economist view that the economy tends towards full employment is that if a business want to produce $1,000 worth of goods to sell to household, they must acquire the resources to produce such goods or services. The owners of these resources are the households who desire payment. Thus, $1,000 in income goes the household and as rational agents the household will spend all the income they received. This means that everything produced is bought. The classical economist believing that because of this the economy would always expand to full employment, because individuals would work for the wage of their productivity, and business would continually be hiring, and therefore there will always be demand for the output of
One of the most important tenets of classical economics is that market economies automatically tend toward full employment. This belief is largely based on the principle Say’s Law. This principle assumes that a rational individual will spend their money expediently and not hoard money. What this idea has to add to the classical economist view that the economy tends towards full employment is that if a business want to produce $1,000 worth of goods to sell to household, they must acquire the resources to produce such goods or services. The owners of these resources are the households who desire payment. Thus, $1,000 in income goes the household and as rational agents the household will spend all the income they received. This means that everything produced is bought. The classical economist believing that because of this the economy would always expand to full employment, because individuals would work for the wage of their productivity, and business would continually be hiring, and therefore there will always be demand for the output of