Fiscal policies typically affect the short-run level of GDP because they cause shifts in the ________,but they will not generally have any long-run effects on real GDP unless they affect ________.
A)AS curve; factor-utilization rates
B)AS curve; factor supplies or factor productivity
C)AD curve; factor-utilization rates
D)AD curve; the unemployment rate
E)AD curve; the level of potential output

Question

Quizplus · Accepted Answer

Fiscal policies affect the short-run level of GDP by shifting the AD curve. Long-run effects on real GDP occur only if these policies impact the level of potential output, which is determined by factors like technology, resources, and productivity.

Fiscal Policies Typically Affect the Short-Run Level of GDP Because