The main shortcoming of the quantity theory manifested itself in its inability to avoid or soften the magnitude of the Great Depression. Here is not the place to determine whether it was the shortcoming of the theory, or the monetary authorities themselves, that failed. Keynes offers a plausible explanation of both types of shortcomings and suggests a potential solution.1 Arguably, the greatest outcome of the Keynesian solution is the introduction of discretionary policy. Discretionary policy requires direct engagement of government in the economic affairs of the country with the intent to reduce the magnitude, or distance, between peak and troughs in businesses cycles and also reduce their duration. Discretionary ...
Get Fiscal Policy within the IS-LM Framework now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
