Ex-Fed's Stern on 'Expansionary, Judicious' Fiscal Policy

The transcript discusses various economic indicators such as GDP and retail sales, and their impact on the economy. It explores the potential effects of fiscal stimulus and the Federal Reserve's response, including interest rate adjustments. The conversation also delves into the transition from monetary to fiscal policy and the challenges of forecasting economic projections in this context. The discussion highlights the importance of judicious policy-making to ensure economic growth without triggering inflation.

What is the significance of retail sales data in the context of GDP?

• It directly affects the GDP estimates for the fourth quarter.

• It only affects GDP in the long term.

• It is irrelevant to GDP calculations.

• It has no impact on GDP.

What is the current consensus view regarding fiscal stimulus and the Federal Reserve's response?

• Fiscal stimulus is expected, with the Federal Reserve likely to raise rates.

• No fiscal stimulus is expected.

• The Federal Reserve will not respond to fiscal stimulus.

• Fiscal stimulus is expected, with the Federal Reserve likely to lower rates.

What is a potential risk of transitioning from monetary to fiscal policy?

• Immediate economic collapse.

• Complete reliance on monetary policy.

• Increased budget deficits beyond historical norms.

• No change in economic growth.

How did the Federal Reserve in the 1980s approach fiscal stimulus forecasting?

• By using economic models with judgment and caveats.

• By making random predictions.

• By relying solely on historical data.

• By ignoring economic models.

What is the expected short-term impact of expansionary fiscal policy combined with modest monetary policy?

• No change in economic growth or inflation.

• Lower economic growth and deflation.

• Immediate economic recession.

• Higher economic growth and increased inflationary pressure.

What concern does substantial fiscal stimulus raise when the economy is near full employment?

• Deflationary pressures.

• Increased unemployment.

• Rising inflation.

• Decreased consumer spending.

What flexibility was observed in the labor market during the 1990s?

• Complete reliance on full-time jobs.

• Increased part-time job opportunities.

• No flexibility at all.

• Decreased labor market participation.