To close an inflationary gap, the Great Moderation consensus on macroeconomics suggests that:
A) a close coordination of fiscal and monetary policy is crucial.
B) the automatic fiscal stabilizers are powerful enough to bring the economy back to equilibrium.
C) policy makers should wait until a negative productivity shock brings the economy back to equilibrium.
D) monetary policy should take the leading role in economic stabilization.

Question

Quizplus · Accepted Answer

The Great Moderation consensus on macroeconomics emphasizes the primary role of monetary policy in stabilizing the economy, particularly in addressing inflationary pressures, rather than relying heavily on fiscal policy, automatic stabilizers, or waiting for external adjustments.

To Close an Inflationary Gap, the Great Moderation Consensus on Macroeconomics