Final answer:
A Neoclassical economist would believe that the economy will rebound on its own during a recession. Their focus is on long-term productivity growth, relying on price and wage flexibility instead of active fiscal stimulus.
Step-by-step explanation:
In a recessionary period of low economic output, a Neoclassical economist would C. believe the economy will eventually rebound. Neoclassical economists argue that prices and wage rates are flexible and will adjust to restore the economy to its potential GDP. Unlike Keynesian economic theory, which advocates for government intervention to stimulate growth via policy measures such as tax cuts or increased government spending, Neoclassicals hold that the key to promoting long-term growth lies in fostering an environment where productivity can flourish. This involves investments in human capital, physical capital, and technology. Policy efforts, therefore, should focus on supporting these underpinnings of sustainable productivity growth rather than attempting to counteract short-term cyclical fluctuations with fiscal stimulus.