1. In the 1970s, the U.S. economy experienced both inflation and unemployment. This led economists to recognize that New Keynesian economics is built on stabilization was a much more difficult task than many economists anticipated the Keynesian approach the Keynesian doctrine correctly asserts that the monetarist approach reducing inflation and unemployment can be the new classical approach addressed by fiscal policies. I only . shifts in aggregate demand could frustrate policymaking efforts whereas shifts in the short- I and only run aggregate supply were more easily C II and III only addressed I, II, and III I only II only I and III only III only New Keynesian economics favor stabilization policies that shift the short-run aggregate supply curve to keep the economy operating close to its potential output. C advocates policies that increase wage and price flexibility so that the economy can self-correct quickly. stresses the stickiness of prices and the need for activist stabilization policies through the aggregate demand management policies to move the economy to its potential output. stresses the importance of operating at potential output and with shifting the long-run aggregate supply curve to the right