Monetary policy affects _____ but does NOT affect:
A) nominal variables; short-run business cycles.
B) real GDP in the long-run; short-run business cycles.
C) real GDP in the long-run; nominal variables.
D) short-run business cycles; real GDP in the long-run.

Question

Quizplus · Accepted Answer

Monetary policy can influence short-run business cycles by affecting demand, interest rates, and inflation. However, in the long-run, it does not have a significant impact on real GDP, as the economy adjusts to its potential output regardless of monetary policy.

Monetary Policy Affects _____ but Does NOT Affect