- Classical Theory of Employment and Output Determination (real):
- Say's Law of Markets (real):
- Quantity Theory of Money (nominal): Regardless of the ammount of money that is in the economy there are real underlying factors which determine the real variables.
Output is a funtion of Capital and Labor modified by some exogenously determined variable "A" or "technology."
- “all economic agents (firms and households) are rational and aim to maximize their profits or utility; furthermore, they do not suffer from money illusion;
- all markets are perfectly competitive, so that agents decide how much to buy and sell on the basis of a given set of prices which are perfectly flexible;
- all agents have perfect knowledge of market conditions and prices before engaging in trade;
- trade only takes place when market-clearing prices have been established in all markets, this being ensured by a fictional Walrasian auctioneer whose presence prevents false trading;
- agents have stable expectations.” (Snowden 2005 p.38)
- Snowdon, Brian and Howard R. Vane. 2005: Modern Macroeconomics: Its Origins, Development And Current State. Edward Elgar Publishing
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