ABSTRACT
The analysis presented in this chapter is meant to be in the Keynesian tradition. This chapter focuses upon macroeconomics, using the same theoretical approach and it seeks to interpret recent macroeconomic policy. The current penchant for expansionary monetary policies and fiscal austerity has no particular theoretical or empirical backing. It has arisen from ideology and politics, not from economics. There is discussion about why the expansion in money over the last few years, following the financial crisis, has not led to high inflation. The main argument against inflation is much simpler than the distortionary tax effect described above people don't like it. Finally, the zerointerest rate policy might not encourage consumption since the consumer would pay less on loans but would also receive less interest on savings. The chapter has been almost entirely about monetary policy, since that has been the major tool used to combat economic fluctuations as part of the current consensus on economics.
