Page 769 - The Principle of Economics

FIVE DEBATES OVER MACROECONOMIC POLICY
It is hard to open up the newspaper without finding some politician or editorial writer advocating a change in economic policy. The president should use the bud- get surplus to reduce government debt, or he should use it to increase government spending. The Federal Reserve should cut interest rates to stimulate a flagging economy, or it should avoid such moves in order not to risk higher inflation. Con- gress should reform the tax system to promote faster economic growth, or it should reform the tax system to achieve a more equal distribution of income. Eco- nomic issues are central to the continuing political debate in the United States and other countries around the world. It is no surprise that when Bill Clinton first ran for president in 1992, his chief strategist posted a sign to remind the staff of the central campaign issue: “The economy, stupid.”
The previous dozen chapters have developed the tools that economists use when analyzing the behavior of the economy as a whole and the impact of policies
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IN THIS CHAPTER YOU WILL . . .
Consider whether policymakers should try to stabilize the economy
Consider whether monetary policy should be made by rule rather than by discretion
Consider whether the central bank should aim for zero inflation
Consider whether fiscal policymakers should reduce the government debt
Consider whether the tax laws should be reformed to encourage saving