controls--so that movements in quantity depend only on shocks to supply. If this situation holds for the majority of markets, one again gets prescriptions for the government's macro policies, but they are basically opposite to the ose from the K odel. The serious alternative to either of these two polar cases is a framework where demand and supply are somehow balanced or equilibrated on the various markets. Although I regard this equilibrium approach as the logical way to think about macroeconomics, this approach - pursued by new clas macroeconomists-- turns out to be inconsistent with basic Keynesian themes assia Approach The new classical macroeconomics, sometimes referred to as rationa expectations macroeconomics or as the equilibrium approach to macroeconomics, egan with Bob Lucas's research(Lucas, 1972, 1976) in the early 1970s. A guiding discipline of this work was that economic agents acted rationally in the context of their environment; notably that people assembled and used nformation in an efficient manner. Although the approach stressed fully worked out equilibrium theories, the analysis was directed at explaining eal-world business fluctuations. The basic viewpoint implied that it would be unsatisfactory to explain"these fluctuations by easily correctable market failures, such as those present in Keynesian models. Hence fluctuations had to reflect real or monetary disturbances, whose dynamic economic effects depended on costs of obtaining information, costs of ad justment, and so on The biggest challenge to the new classical approach was to explain why money was non-neutral, and, in particular, why monetary disturbances played a