Answer to Question #293383 in Macroeconomics for Ali

Question

What is the theory of New Classical Economists?

Answer 1

This theory is based on Walrasian assumptions. All agents are assumed to maximize utility on the basis of rational expectations. At any one time, the economy is assumed to have a unique equilibrium at full employment or potential output achieved through price and wage adjustment. The economists believe that for countries to develop, they must liberate their markets, encourage entrepreneurship, privatise state owned industries, and reform labour markets, such as by reducing the powers of trade unions