Four Ways Out
When an economy falls into a depression, governments can try four tools – fiscal policy, credit policy, monetary policy, and inflation – to return employment to its normal level and production to its “potential” level. The problem today is that governments are down to two of these tools, and neither of them is ideal for the job.
BERKELEY – When an economy falls into a depression, governments can try four things to return employment to its normal level and production to its “potential” level. Call them fiscal policy, credit policy, monetary policy, and inflation.