Brief History of Macroeconomic Thought and Policy
Read this chapter to examine macroeconomic attitudes towards economic policies of the three main schools of economic thought: Classical, Keynesian, and Monetarist. Also, learn about modern day interpretations of the main ideas.
3. Macroeconomics for the 21st Century
- The actions of the Fed starting in late 1979 reflected a strong inflation constraint and a growing recognition of the impact lag for monetary policy.
- Reducing the deficit dominated much of fiscal policy discussion during the 1980s and 1990s.
- The events of the 1980s and early 1990s do not appear to have been consistent with the hypotheses of either the monetarist or new classical schools.
- New Keynesian economists have incorporated major elements of the ideas of the monetarist and new classical schools into their formulation of macroeconomic theory.