While much of New Classical macroeconomics is being refuted by the evidence, at least one part of it may be a permanent legacy to all economists. It is the insistence on a certain aspect of macroeconomic policy:
A) it has as much impact on SAS as on AD.
B) it has its impact on nominal and not real variables.
C) people will try to anticipate it and then act accordingly.
D) it has no impact on SAS or AD, but does affect LAS.

Question

Quizplus · Accepted Answer

The idea that people will try to anticipate macroeconomic policy and act accordingly is a key insight from New Classical macroeconomics that is still widely accepted today. This idea is based on the assumption of rational expectations, which states that individuals will use all available information to form their expectations about future economic conditions. As a result, any changes in policy will be anticipated and already incorporated into people's behavior, limiting the effectiveness of that policy.

While Much of New Classical Macroeconomics Is Being Refuted by the Evidence