In the long run, the only effect of monetary policy is on the:
A) long-run aggregate supply.
B) interest rate.
C) aggregate output level.
D) aggregate price level.

Question

Quizplus · Accepted Answer

In the long run, monetary policy primarily affects the aggregate price level. According to the classical dichotomy, in the long run, prices adjust to changes in the money supply, and the economy returns to its potential output, leaving real variables like output unaffected by monetary policy.

In the Long Run, the Only Effect of Monetary Policy