The new classical theoretical critique of the existing macroeconomic models is based on
A) the way people form their expectations.
B) the nature of the tradeoff between inflation and growth.
C) wages and labor market equilibrium.
D) the link between the money market and the goods market.

Question

Quizplus · Accepted Answer

The new classical theoretical critique focuses on the way that people form their expectations, arguing that existing macroeconomic models rely on assumptions about rational expectations that do not reflect the way that individuals actually make decisions. This critique suggests that macroeconomic models should be revised to incorporate more realistic assumptions about the formation of expectations.

The New Classical Theoretical Critique of the Existing Macroeconomic Models