1. Some people will argue against using either monetary or fiscal policy, instead of supporting a laissez-faire approach to the economy. The well-known economist Milton Friedman, for example, believed in the permanent income hypothesis and was also a monetarist. What monetary policy prescription do monetarists support?
2.The Phillips curve shows an important tradeoff faced by economic policymakers. This tradeoff was used to point out the legitimacy of government intervention in the economy for many years.
a. What is the Phillips curve? What does it show? Why is it important to economic policymakers?
b. The tradeoff demonstrated by the Phillips curve seemed to fail during the 1970s. Why? What happened?
c. What is the currently accepted belief about the Phillips curve? Hint: This question has to do with the long-run versus the short run.
1. Some people will argue against using either monetary or fiscal policy, instead of supporting a laissez-faire approach to the economy. The well-known economist Milton Friedman, for example, believed in the permanent income hypothesis and was also a monetarist. What monetary policy prescription do monetarists support?
2.The Phillips curve shows an important tradeoff faced by economic policymakers. This tradeoff was used to point out the legitimacy of government intervention in the economy for many years.
a. What is the Phillips curve? What does it show? Why is it important to economic policymakers?
b. The tradeoff demonstrated by the Phillips curve seemed to fail during the 1970s. Why? What happened?
c. What is the currently accepted belief about the Phillips curve? Hint: This question has to do with the long-run versus the short run.
