Six Debates Over Macroeconomic Policy

Six Debates Over Macroeconomic Policy

Six Debates Over Macroeconomic Policy (Student Follow up)

You mentioned the pros in making fiscal and monetary policies to stabilize the economy; however, some argue that using monetary and fiscal policy does not affect the economy right away and takes time.  Because as the chapter mentions, aggregate demand is affected by monetary policy by changing interest rates and affects spending, many households have their spending plan way in advance, which takes time for changes in the interest rates to change the aggregate demand for the goods and services we use.

Essentially, the chapter counters the pro of this issue by saying policymakers attempt to stabilize the economy “by having the opposite effect.”  Those who argue this say to just leave it as is and not get involved.

Do you think this is a good approach for policymakers?

Reference

Mankiw, N. G. (2015). Principles of Macroeconomics (7th ed.). Stamford, CT: Cengage Learning.

………………….Answer preview……………………

Fiscal and monetary policies impact a country’s economy with a considerable lag. The fiscal-lag results from prolonged political processes governing variations in expenditure and taxation. As a result of these lags, policy makers may be forced to utilize crystal-balls to establish the future……………….

APA

131 words

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