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The “Keynesian” cure for recession was to stimulate demand, and the cure for inflation was to curb demand, but it was obviously impossible to do both at the same time…
This led Robert Mundell
to propose, in 1971, that the job of ending inflation be assigned entirely to monetary policy
(similar to what is now called “inflation targeting”), while the toolkit of fiscal policy should be
expanded to include a microeconomic focus on the supply side--i.e., through tax incentives,
privatization and deregulation to enhance potential supply. |
