New Keynesians conclude that

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New Keynesians generally believe that appropriate activist policies, such as monetary policy and fiscal policy, can help dampen cyclical fluctuations in the economy. This is based on their belief in the importance of real rigidities and imperfect competition in the economy, which can lead to situations where prices and wages are slow to adjust to changes in supply and demand. By using policies to stimulate demand during downturns and cool down overheated economies during upswings, New Keynesians believe that governments can help stabilize the economy and reduce the severity of business cycles. They do not believe that such policies will necessarily increase the length of cyclical fluctuations, and there is no evidence to suggest that they have a consistent or predictable effect on the length of these fluctuations.

New Keynesians Conclude That