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

Question

Quizplus · Accepted Answer

The new classical model assumes that individuals have rational expectations about aggregate demand, meaning that they have access to all relevant information and make optimal decisions based on that information. This assumption is central to the model's explanation of how the economy adjusts to changes in supply and demand. The other options, such as rigid money wage rates or sticky prices, are assumptions of other macroeconomic models, but not the new classical model.

One Assumption of the New Classical Model Is That