Examine the implications of Say's Law of Markets in classical economic theory. Which of the following assertions encapsulates this foundational doctrine?

💡 Solution & Explanation

Say's Law asserts that the production of commodities generates an equivalent amount of total income, which is subsequently spent on purchasing goods, thereby precluding general overproduction. Keynesian economics challenged this by demonstrating that savings can exceed planned investment, leading to deficient aggregate demand and involuntary unemployment. Classical economists firmly believed in the self-correcting capacity of free market mechanisms.