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Principles of Economics- Mankiw (5th) 766

Principles of Economics- Mankiw (5th) 766 - 792 PA R T T H...

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792 PART THIRTEEN FINAL THOUGHTS on the economy. This final chapter presents both sides in five leading debates over macroeconomic policy. The knowledge you have accumulated in this course pro- vides the background with which we can discuss these important, unsettled is- sues. It should help you choose a side in these debates or, at least, help you see why choosing a side is so difficult. SHOULD MONETARY AND FISCAL POLICYMAKERS TRY TO STABILIZE THE ECONOMY? In Chapters 31, 32, and 33, we saw how changes in aggregate demand and aggre- gate supply can lead to short-run fluctuations in production and employment. We also saw how monetary and fiscal policy can shift aggregate demand and, thereby, influence these fluctuations. But even if policymakers can influence short-run eco- nomic fluctuations, does that mean they should? Our first debate concerns whether monetary and fiscal policymakers should use the tools at their disposal in an at- tempt to smooth the ups and downs of the business cycle.
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