The Great Moderation consensus in macroeconomics is that:
A)prices are sticky in the long run but flexible in the short run.
B)decreases in aggregate output can be traced to poor monetary policy.
C)in the long run, neither monetary nor fiscal policy can reduce unemployment below the natural rate.
D)monetary and fiscal policies are equally effective at curing recessions.

Question

Quizplus · Accepted Answer

The Great Moderation consensus in macroeconomics is that in the long run, neither monetary nor fiscal policy can reduce unemployment below the natural rate. This view holds that although short-run stabilization policies can help smooth fluctuations in output and employment, in the long run, these policies will not permanently affect the natural rate of unemployment, which is determined by structural factors such as the degree of competition in the labor market, the level of education and training of the workforce, and the efficiency of labor market institutions. The consensus also asserts that decreases in aggregate output can be traced to factors other than poor monetary policy, such as changes in productivity or shifts in global economic conditions. Therefore, option C is the most appropriate choice.

The Great Moderation Consensus in Macroeconomics Is That