Advocates of stabilization policy prefer quick medicine for economic ills. This leads some observers to favor fiscal policy while others endorse monetary policy. Describe the positions of each side in the debate and what seems to be the current consensus.

What will be an ideal response?

Fiscal policy advocates argue that fiscal policy works more quickly on aggregate demand and that monetary policy only works indirectly through interest rates and investment spending. Monetary policy advocates emphasize the political nature of fiscal policy, which means that fiscal policy has very long lags between recommendation and action. In the current, rather confrontational and divided political atmosphere, most analysts agree that monetary policy may be the “only game in town.”