Answer to Question #290898 in Macroeconomics for lisa

Question

Suggest solutions to the three major weaknesses of the New Classical Theory.

Answer 1

solutions to the three main weaknesses of new Classing theory are;

1)ensuring that it is broad in scope. This theory focuses on economic factors such as capital leaving behind non economical factors such as degree of political stability, legal and political institutions. If these factors are considered it will be broad in scope.

2) understanding that economic development is not gradual- the neo classists believed that economic development is gradual and ignored the fact the possibility of fluctuations in economic development.

3)Avoiding unrealistic assumptions. For instance the new classic theory assumes that everyone is employed which is not true. the theory should agree with the fact that not everyone has an employment.