Refer to the information provided in Figure 17.2 below to answer the questions that follow. Figure 17.2 -Refer to Figure 17.2. According to monetarists, an expansionary fiscal policy in the long run and after all the adjustments have been made A) does not increase equilibrium output or the price level. B) increases equilibrium output above Y₁, but does not change the price level. C) increases the price level above P₁, but does not change equilibrium output. D) increases equilibrium output above Y₁ and decreases the price level below P₁.

Question

Quizplus · Accepted Answer

Monetarists believe that in the long run, the economy is self-correcting and output returns to its natural level. Thus, expansionary fiscal policy only leads to higher prices without affecting long-term output.

Refer to the Information Provided in Figure 17