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Chapter 26 Rational Expectations Redux: Monetary Policy Implications

Chapter Objectives

By the end of this chapter, students should be able to:

  1. Describe how the new classical macroeconomic model differs from the standard, pre-Lucas AS-AD model.
  2. Explain what the new classical macroeconomic model suggests regarding the efficacy of activist monetary policy.
  3. Explain how the new Keynesian model differs from the new classical macroeconomic model.
  4. Assess the extent to which policymakers can improve short-run macroeconomic performance.