Final answer:
New classical economics supports a return to full employment without the need for fiscal or monetary intervention and suggests that such policies may lead to inflation. The neoclassical model emphasizes a vertical aggregate supply curve, implying that monetary policy's primary role is managing inflation for a healthier economy over the long term. Option number d is correct.
Step-by-step explanation:
New classical economics espouses a view where the economy's ability to adjust back to full employment after fluctuations is swift, assuming there are flexible prices. This aligns with the classical model's vertical aggregate supply curve at full employment GDP, advocating for a "hands off" approach to fiscal and monetary policy. Essentially, new classical economics suggests that active fiscal or monetary policies are unnecessary and can lead to inflation rather than economic growth. This contrasts with Keynesian economics, where active fiscal policy is recommended to tackle weak aggregate demand.
Most central bankers subscribe to the idea that a neoclassical model accurately reflects economic behavior over a medium to long-term period. In this model, any shift in aggregate demand due to expansionary monetary policy may only result in a change in the price level, with no real impact on GDP or unemployment. Therefore, monetary policy is seen primarily as a mechanism for controlling inflation rather than stimulating economic growth or reducing unemployment.