Different business cycle models

Question

Quizplus · Accepted Answer

Different business cycle models can have contradictory implications for monetary and fiscal policy. For example, the Keynesian model suggests that fiscal policy should be used to stabilize the economy, while the classical model suggests that the economy will naturally return to equilibrium without government intervention. Similarly, some models suggest that monetary policy is more effective than fiscal policy in stabilizing the economy, while others suggest the opposite. Therefore, policymakers need to carefully consider the specific model they are using when deciding on the appropriate policy response to economic fluctuations.

Different Business Cycle Models