Question

The school of thought that monetary policy should be the main tool of stabilization policy, that is skeptical about the use of fiscal policy, and that recognizes constraints on policy imposed by the natural rate of unemployment and the political business cycle is

Answer 1

Geat Moderation Consensus

Step-by-step explanation:

The Great Moderation Consensus depends on the belief that monetary policy (which is the set of policies adopted by the central bank of a nation for the purpose of attaining macroeconomic goals) is the main call to action needed to strengthen an economy rather than fiscal policies. Fiscal policies are based on the use of government systems of revenue collection and expenditure to regulate an economy.

Between the mid-1980s to 2007, the central bank of the United States adopted the Taylor Rule in a bid to achieve macroeconomic stability. This monetary policy, however, resulted in greater financial risk-taking, an increase in debt, and subsequently, the Great Recession which spanned from 2007 to 2009.