According to the New Keynesian Theory
A)only fiscal policy is an effective stabilization policy.
B)only monetary policy is an effective stabilization policy.
C)both fiscal and monetary policy can be effective stabilization policies.
D)neither fiscal nor monetary policy is an effective stabilization policy.

Question

Quizplus · Accepted Answer

According to the New Keynesian theory, both fiscal and monetary policies can be effective stabilization policies. Fiscal policy involves government spending and taxation policies that can influence aggregate demand, while monetary policy involves central bank actions that can affect interest rates and the money supply. Both of these policies can be used to manage macroeconomic fluctuations and stabilize the economy.