New Classical Macroeconomics And Macroeconomics

1555 Words Dec 3rd, 2016 7 Pages
Introduction

New classical Macroeconomics is an important school of macroeconomics development since 1970s. New Classical Macroeconomics is originally evolved from the school of Rational Expectations and monetarism. New classical Macroeconomics is also referred to the Macroeconomics of the rational expectations, or equilibrium method for Macroeconomics. New classical Macroeconomics abides by traditions of the classical economics and believes in the effectiveness of market forces. New classical Macroeconomics tries to develop theories of macroeconomics based on the hypothesis that economic parties behavior maximizes and market cleaning. New classical Macroeconomics believes in that if market mechanism works spontaneously, macroeconomic issues, such as unemployment and recession, will be solved (Leslie, 1993). The main representative researchers of New classical Macroeconomics include Robert Lucas, Thomas Sargent, R.J. Barro and Neil Wallace.

The main theory of New classical Macroeconomics is the Policy ineffectiveness theorem. Specifically speaking, New classical Macroeconomics usually the following four propositions: first, private economy can be stable; second, currency is neutral in the long run; third, currency can be neutral in the short term; and forth, the economic policy of Keynesian positive intervention is harmful (Dornbusch, 1990). Currently, New classical Macroeconomics and Keynesian are the two major schools of mainstream economics in the world.

This essay…
Open Document