Identify the Classical prescription for curing unemployment

Identify the Classical prescription for curing unemployment and contrast it with the Keynesian prescription. Which prescription do you agree with? Why?

Solution

Classical prescription is based on four major assumptions: pure competition exists, wages and prices are Flexible, people are motivated by self-interest, and people cannot be fooled by money illusion. This classical approach is based on the entire on the average based calculation and prices, wages, and interest rate are freely moved whatever level of supply and demand dictate. Therefore, the classical prescription to curing unemployment is that if there is a demand for the employees, and then companies will hire them. Unemployment rate could be extremely low or high, and wages could be based on what it is necessary of the demand, which generally could be lower or higher than the federal minimum wage. The classical prescription also does not need the federal and state government to get involved.