One strategy consistent with the new classical macroeconomists' theories would have
A) fiscal policy focus on maintaining full employment regardless of the size of the resulting budget deficit.
B) monetary policy stick to an announced policy to keep the rate of inflation to some specified low figure.
C) the government emphasize policies of wage and price controls to achieve a targeted full-employment rate with stable prices.
D) monetary authorities impose a structure of variable tax rates that automatically adjusts to changes in the unemployment rate.
E) both fiscal and monetary policy coordinated in a way that ensures that both the Phillips curve and long-run aggregate supply curves are vertical.

Question

Quizplus · Accepted Answer

New classical macroeconomists believe that monetary policy is more effective than fiscal policy in stabilizing the economy. They argue that government attempts to manipulate real output through fiscal policy may have unintended consequences, such as inflation or reduced economic growth. Therefore, an effective strategy would be for monetary policy to focus on maintaining price stability by keeping inflation low and steady through an announced policy. This would allow individuals and businesses to make better economic decisions based on reliable expectations of future prices.

One Strategy Consistent with the New Classical Macroeconomists' Theories Would