One assumption of the new classical model is that
A) markets are not purely competitive.
B) people make rational expectations about aggregate demand.
C) money wage rates are rigid.
D) prices are "sticky" upward.

Question

Quizplus · Accepted Answer

The assumption that people make rational expectations about aggregate demand is a key component of the new classical model. This means that individuals and firms base their decisions on a rational assessment of current and future economic conditions, rather than being surprised by unexpected changes in the economy. The other choices (A, C, D) are assumptions of other economic models, but not of the new classical model.

One Assumption of the New Classical Model Is That