We face A Very Stimulating Crisis, and economists are no longer so sure they know what to do:
Does the U.S. economy in early 2008 need a stimulus? If so, will tax cuts or attempts by the Fed to lower interest rates do the trick?
I used to be able to answer such questions with confidence. Now I cannot.
The theory of the causes of unemployment, interest rates, and inflation falls under the subject known as macroeconomics. Macroeconomics is like astrology or Freudian psychology, in that a lot of people used to believe it, and a lot of people still do, but many with a scientific bent tend to stay away from it.