Passage (CARS): Read the following excerpt and answer the question below.
"Classical economics posited that markets, left to their own devices, tend toward equilibrium through the mechanism of price adjustment: excess supply drives prices down until demand absorbs the surplus, and excess demand drives prices up until supply meets demand. This view, associated with Smith, Ricardo, and later Marshall, treated unemployment as transitory — a temporary dislocation corrected by wage flexibility. The Great Depression challenged this orthodoxy profoundly. Keynes argued that markets could settle into persistent underemployment equilibria, where low demand suppresses investment, which suppresses employment, which further suppresses demand in a self-reinforcing cycle. Government intervention — deficit spending to stimulate demand — could, in Keynes' view, break this cycle by injecting purchasing power that private actors were unwilling to supply."
According to the passage, the classical economists' view of unemployment was that it:
- ACould become a permanent feature of market economies without intervention
- BWas caused by government interference in price mechanisms
- CWas a short-lived imbalance that price flexibility would automatically correct
- DRequired fiscal stimulus to resolve through increased consumer demand