Back in early 2009, many economists seemed to move away from New Keynesian ideas, back to the so-called “vulgar Keynesianism” of the 1950s and 1960s. Recall that by the 1990s, the NKs accepted many ideas from the monetarists:
1. Monetary policy determines the path of NGDP, and thus fiscal countercyclical policy is useless.
2. Wages and prices are flexible in the long run, and hence the economy eventually adjusts back to LRAS curve. Demand side policies only have a short-term impact on output.