If we compare the frictionless neoclassical theory with the rational expectations approach, we can conclude that in both cases
A)wages and prices are assumed to be rigid
B)there is little or no room for stabilization policy since markets are assumed to clear rapidly
C)the AS-curve is upward sloping in the short run but vertical in the long run
D)the effects of fiscal policy on output are permanent
E)all of the above

Question

Quizplus · Accepted Answer

Both the frictionless neoclassical theory and the rational expectations approach assume that markets clear rapidly, leaving little room for stabilization policy.

If We Compare the Frictionless Neoclassical Theory with the Rational