Consider the following statements about the Classical and Keynesian approaches to the determination of output and employment:
- The Classical approach assumes that wages and prices are flexible and markets always clear.
- Keynesian economics argues that active government intervention is necessary to achieve full employment.
- In the Classical model, savings always equals investment due to the flexibility of the interest rate.
Which of the above statements are correct?
1
1 and 2 only
2
2 only
3
1 and 3 only
4
2 and 3 only
5
1, 2, and 3