New classical macroeconomics strives to provide neoclassical microeconomic foundations for macroeconomic new classical macroeconomics pdf. 1776 is considered to be the birth of the school.
Perhaps the central idea behind it is on the ability of the market to be self-correcting as well as being the most superior institution in allocating resources. The central assumption implied is that all individuals maximize their economic activity. Walras that helped solidify the research in economic science as a mathematical and deductive enterprise, the essence of which is still neoclassical and makes up what is currently found in mainstream economics textbooks to this day. Of particular importance in Keynes’ theories was his explanation of economic behavior as also being led by “animal spirits”. The Post-World War II period saw the widespread implementation of Keynesian economic policy in the United States and Western European countries. The New Classical school emerged in the 1970s as a response to the failure of Keynesian economics to explain stagflation.