according to classical economics if the economy is in a rece

according to classical economics, if the economy is in a recession, what must the government do to increase output to the full-employment

Solution

According to Classical theory of economics, there should be no intervention of government in the economy whatever be the situation of economy. In fact, Classical economists believe that government intervention in economy is harmful for the economy rather than being beneficial.

Classical economists stated that government should play the role of facilitator that facilitate free working of market rather than contributing directly to market mechanism.

So, according to Classical economics, if economy is in recession then government must not do anything to increase the output. In fact, government should do nothing. In other words, government should refrain itself from doing anything.

Classical economists believed that prices, wages, and interest rates are fully flexible and in case deficiency of aggregate expenditure (recession) arises; the prices, wages, and interest rates would adjust quickly so that equilibrium is restored at full employment level of output and recession is eliminated.