Fiscal policy cannot raise output above the natural rate in the
A) short run.
B) long run.
C) both of the above.
D) neither of the above.

Question

Quizplus · Accepted Answer

Fiscal policy, which involves government spending and taxation, can influence the level of economic activity in the short run, but in the long run, it cannot raise output above the natural rate. The natural rate of output is determined by factors such as technology, resources, and the labor force, which are not affected by fiscal policy in the long run.

Fiscal Policy Cannot Raise Output Above the Natural Rate in the