Question

According to John Taylor, how did a shift toward policy discretion cause the Great Recession? What are the three broad explanations of the Great Moderation and which one does Taylor believe is most consistent with his explanation of the Great Recession?

Answer 1

the great moderation is the name given to the period of decreased macroeconomic volatility experienced in the united states from the mid 1980s to the financial crisis in 2007. the three potential causes of great moderation are structural change in the economy,improved economic policies, and good luck.although its a matter of debate some consider the great moderation to have ended with the financial crisis and the great recession.  the economist believing that a great recession was merely an interruption of the great moderation rather than an end. since 2010 economic growth and inflation is once again running roughly in line with the range seen prior to the financial crisis