Monetarists argue that fiscal policy is ineffective because:
A) the velocity of money is predictable.
B) the crowding-out effect reduces investment.
C) prices and wages are sticky in the short run.
D) it causes the value of the dollar to depreciate.

Question

Quizplus · Accepted Answer

Monetarists believe that fiscal policy is ineffective because it leads to the crowding-out effect, where increased government spending and borrowing leads to higher interest rates, reducing private investment. This reduces the potential gains from any fiscal policy action, making it ineffective.

Monetarists Argue That Fiscal Policy Is Ineffective Because