Question

what is the effect of exchange rate policy in an neo-classical model?

Answer 1

New classical economist argue that the consumers perception of products value is the driving factor in its price.classical economists assume that the most important factor in a product price is its cost of production. Neoclassical economics stipulates that a product or service often has value above and and beyond its production cost.why classical economic theory assumes that a product value derived from the cost of materials + the cost of labour,new classical economist says that consumer perceptions of the value of a product affect its price and demand. Competition leads to an efficient allocation of resources within an economy and the force of supply and demand create market equilibrium.

Exchange rate policy and the new classical model -
bake anomic and social outlook of a country will influence its currency exchange rate compared to other countries.
an exchange rate is how much of any country's currency by another foreign currency.pthe market friendly approach which suggests that while markets work they sometimes fails to to emerge and a government it has an important role in compensating for three main market failures missing markets in perfect knowledge and externality.