Five Debates over Macroeconomic PolicyChapter 34Copyright © 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to:
Permissions Department, Harcourt College Publishers, 6277 Sea Harbor Drive, Orlando, Florida 32887-6777. Five Debates over Macroeconomic Policy1. Should monetary and fiscal policymakers try to stabilize the economy?
2. Should monetary policy be made by rule rather than by discretion?
3. Should the central bank aim for zero inflation? Five Debates over Macroeconomic Policy4. Should the government balance its budget?
5. Should the tax laws be reformed to encourage saving? 1. Should Monetary and Fiscal Policymakers Try to Stabilize the Economy? Pro: Policymakers should try to stabilize the economyThe economy is inherently unstable, and left on its own will fluctuate.
Policy can manage aggregate demand in order to offset this inherent instability and reduce the severity of economic fluctuations. Pro: Policymakers should try to stabilize the economyThere is no reason for society to suffer through the booms and busts of the business cycle.
Monetary and fiscal policy can stabilize aggregate demand and, thereby, production and employment. ...