What debates has the modern consensus resolved? What debates has it not resolved?
The modern consensus has resolved the debate over the effectiveness of both expansionary fiscal and monetary policy. Expansionary fiscal policy is considered effective, although it is limited by the problem of time lags, making monetary policy the stabilization tool of choice except in special circumstances. Expansionary monetary policy is considered effective except in the case of a liquidity trap. However, the modern consensus has not resolved the advisability of the Fed’s inflation target, and what, if any, kind of unconventional monetary policy it should use in the situation of a liquidity trap.