The neoclassical perspective argues that, in the long run, the economy will adjust back to its potential GDP level of output through flexible price levels. A rational expectations perspective argues that people have excellent information about economic events and how the economy works and that, as a result, price and other economic adjustments will happen very quickly.

In adaptive expectations theory, people have limited information about economic information and how the economy works, and so price and other economic adjustments can be slow Thus, the neoclassical perspective views the long-run AS curve as vertical.

neoclassical perspective — the philosophy that, in the long run, the business cycle will fluctuate around the potential, or full-employment, level of output. rational expectations — the theory that people form the most accurate possible expectations about the future that they can, using all information available to them. adaptive expectations — the theory that people look at past experience and gradually adapt their beliefs and behavior as circumstances change. economy — approaching full employment.