New classical economists differ from traditional classical economists because new classical economists
A)Focus on budget restraint and the use of monetary policy when the economy overheats.
B)Believe people's rational expectations will lead them to offset government policy.
C)Believe that economic failures are inherent in a capitalist economy.
D)Believe tax cuts and government spending should be used to increase demand and output.

Question

Quizplus · Accepted Answer

New classical economists believe that people have rational expectations and will respond to government policies in such a way that will offset their intended effects. This means that traditional policies like tax cuts and government spending may have limited effectiveness in stimulating economic growth as people will adjust their behavior accordingly. They also emphasize the importance of market equilibrium and the idea that any market failures will be self-correcting in the long run.

New Classical Economists Differ from Traditional Classical Economists Because New