3)Whati is "new" about the new classical economics?
Compare classical and new classical economics in terms of theoretical assumptions and policy implications
 


Classical policy implications 
Governments can alter only the price level and composition of output. 
Government should be an agent that controls price stability, provides public goods and maintains an environment of rapidly clearing, perfectly competitive markets. 
There is no involuntary unemployment or unsold goods. 
The only problem is inflation and it can result from the irresponsible behaviour of governments (monetary authorities). 
New Classic Policy implications:
Policy ineffectiveness
dynamic time inconsistency and credibility
real cost of reducing inflation

Neo Classical Assumptions:
-People have imperfect knowledge
-Prices and Wages are perfectly flexible
-People are rational and try to maximize utility
-Supply of labor and Labor prices depends on reletive prices. 
-Economy is in equlibrium in LR

Klasik Assumptions:
-Perfect Knowledge for agents
-Economy is in equlibrium in LR
-Prices and Wages are perfectly flexible