Most Keynesians suggest that the Fed
A)use discretion in setting monetary policy.
B)use fiscal policy to combat unemployment in the short run.
C)follow a rule, such as keeping the money growth rate at 3%, regardless of the state of the economy.
D)use fiscal policy to combat inflation in the long run.

Question

Quizplus · Accepted Answer

Keynesians typically believe that monetary policy should be discretionary, meaning that the Fed should have the flexibility to adjust interest rates and other policy tools based on the current state of the economy. This allows the Fed to respond to changes in economic conditions in a timely and effective manner.

B, C, and D are not typically emphasized by most Keynesians. While some may support fiscal policy to combat unemployment in the short run, the emphasis is generally on monetary policy. Keynesians also do not typically advocate for strict rules-based approaches to monetary policy like keeping the money growth rate at a fixed level. Finally, Keynesians generally do not believe that fiscal policy is effective in combating inflation in the long run, instead favoring monetary policy as the primary tool for controlling inflation.

Most Keynesians Suggest That the Fed