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In this lecture we look more closely at both monetary and fiscal policies as well as the difficulty that time lags introduce in the attempt to achieve macro policy. Finally, we examine recent U.S. fiscal policy and monetary policy in more detail. Upon completion of this lecture, you should understand and be able to answer these questions. 1. What is stabilization policy? 2. How does the FED use monetary policy to stabilize the economy? 3. How do lags affect stabilization policy? 4. Can the attempts by the government to make the economy better actually make it worse? 5. What has the government done about the deficit and the debt?
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