New classical theories were an attempt to explain ?
Correct answer: C. the stagflation of the 1970s
- A. how unemployment could have persisted for so long during the Great Depression
- B. The increase in the growth rate of real output in the 1950s
- C. the stagflation of the 1970s
- D. Why policy changes that are perceived as permanent have more of an impact on a person's behaviour than policy changes that are viewed as temporary.
Explanation
New classical theories developed partly in response to the stagflation of the 1970s, which challenged the stable inflation-unemployment trade-off suggested by older Keynesian models. Their emphasis on expectations and policy effects helped explain simultaneous inflation and unemployment.
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