In the long-run,an increase in the budget deficit and an expansionary monetary policy would:
A)increase the price level only.
B)increase both the price level and real income.
C)increase real income only.
D)none of the above.

Question

Quizplus · Accepted Answer

In the long-run, an increase in the budget deficit and expansionary monetary policy typically lead to higher aggregate demand, which increases the price level. However, real income does not increase in the long-run due to the economy reaching its full capacity, leading to inflation rather than an increase in real output.

In the Long-Run,an Increase in the Budget Deficit and an Expansionary