In the long run, many economists argue that fiscal policy is ineffective because it has little effect on
A)potential GDP.
B)the inflation rate.
C)the price level.
D)nominal GDP.
E)nominal interest rates.

Question

Quizplus · Accepted Answer

Fiscal policy can have short-term effects on the economy, but in the long run, it is believed to have little effect on potential GDP. This is because potential GDP is determined by the economy's underlying productive capacity, such as its labor force, capital stock, and technology, which are not directly affected by fiscal policy.

In the Long Run, Many Economists Argue That Fiscal Policy