ECO 372 Week 5 participation Principles of Macroeconomics, Ch. 23: Six Debates Over Macroeconomic Policy

Consider the following as you read:

1. Consider what causes the lags in the effect of monetary and fiscal policy on aggregate demand. What are the implications of these lags for the debate over active versus passive policy?
2. Consider what might motivate a central banker to cause a political business cycle. What does the political business cycle imply for the debate over policy rules?
3. Be prepared to explain how credibility might affect the cost of reducing inflation.
4. Be prepared to explain why some economists are against a target of zero inflation?
5. Consider what adverse effects might be caused by tax incentives to increase saving?