General Equilibrium Theory - Other Schools - New Classical Macroeconomics

New Classical Macroeconomics

See also: New classical macroeconomics and Real Business Cycle Theory

While general equilibrium theory and neoclassical economics generally were originally microeconomic theories, New classical macroeconomics builds a macroeconomic theory on these bases. In new classical models, the macroeconomy is assumed to be at its unique equilibrium, with full employment and potential output, and that this equilibrium is assumed to always have been achieved via price and wage adjustment (market clearing). The best-known such model is Real Business Cycle Theory, in which business cycles are considered to be largely due to changes in the real economy, unemployment is not due to the failure of the market to achieve potential output, but due to equilibrium potential output having fallen and equilibrium unemployment having risen.

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Other articles related to "new classical macroeconomics, new classical, macroeconomic":

New Classical Macroeconomics - Foundation and Assumptions
... New classical economics is based on Walrasian assumptions ... New classical economics has also pioneered the use of representative agent models ... disjuncture between microeconomic behavior and macroeconomic results, as indicated by Kirman (1992), and the fallacy of composition ...

Famous quotes containing the word classical:

    Against classical philosophy: thinking about eternity or the immensity of the universe does not lessen my unhappiness.
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