The consequences would include lower potential growth and relatively lower living standards. Our longer-term fiscal challenges would be significantly greater. Monetary policy The implications for monetary policy of these supply-side issues have been limited, but they begin to matter more as we near full employment.
13  See, for example, Robert F. Martin, Teyanna Munyan, and Beth Anne Wilson (2014), “Potential Output and Recessions: Are We Fooling Ourselves?” IFDP Notes (Washington: Board of Governors of the Federal Reserve System, November 12); and Olivier Blanchard, Eugenio Cerutti, and Lawrence Summers (2015), “Inflation and Activity – Two Explorations and Their Monetary Policy Implications (PDF),” IMF Working Paper WP/15/230 (Washington: International Monetary Fund, November).