On the basis of both theory and empirical evidence, most economists believe that changes in monetary policy have
A)important long- run effects by changing real interest rates.
B)no effect on real GDP or inflation in the long run.
C)no effect on real GDP or factor utilization in the short run.
D)no long- run effect on real GDP but a substantial long- run effect on inflation.
E)powerful effects on real GDP and factor prices both in the short run and in the long run.

Question

Quizplus · Accepted Answer

The majority of economists believe that changes in monetary policy do not have a long-run effect on real GDP but do have a substantial long-run effect on inflation. This is supported by both theory and empirical evidence, as monetary policy can influence inflation expectations and the behavior of economic agents, but does not have a significant impact on long-run output or productivity.

On the Basis of Both Theory and Empirical Evidence, Most