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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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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