Lessons from Recent Macroeconomic Policy Making

A core argument of this book is that there are both long-run and short-run causes of low-employment equilibrium. The long-run causes are distortions in the price system that reduce aggregate supply. The short-run causes are price and wage rigidities that bring about distortions in aggregate demand and aggregate supply, sometimes leading to a need for corrective stabilization policies by government. In this chapter, we will see how the long-run causes can frustrate the short-run stabilization policies.

Traditionally, in macroeconomic policy analysis (and as evidenced by opinion editorials by Alan Blinder, much quoted in the previous chapters), macroeconomists see the distinction between ...

Get Macroeconomics, Second Edition, Volume II, 2nd Edition 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.