Abstract
According to the New Consensus Macroeconomics (NCM), economic policy deals with different problems depending on the length of the period considered. If the period is long enough, competitive forces drive the rate of unemployment to the ‘natural level’. Theoretically, a succession of such periods should not exhibit statistical evidence of unemployment pressure on wages or consumer prices; the Phillips relation should look vertical. In each of these ‘long periods’, expected prices variations equal the effective values, and contracts are negotiated in accordance with the right expectations. That is the reason why systematic (hence expected) stimulations of aggregate demand1 do not reduce real wages and unemployment; they only strengthen inflation.
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© 2007 Angel Asensio
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Asensio, A. (2007). Monetary and Budgetary-Fiscal Policy Interactions in a Keynesian Context: Revisiting Macroeconomic Governance. In: Arestis, P., Hein, E., Le Heron, E. (eds) Aspects of Modern Monetary and Macroeconomic Policies. Palgrave Macmillan, London. https://doi.org/10.1057/9780230627345_6
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DOI: https://doi.org/10.1057/9780230627345_6
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