The analysis that monetary policy is effective in the short-run but not in the long-run can be presented by which of the following statement?
A)The short-run AS curve is flat,but the long-run AS is vertical.
B)The short-run AS curve is positively sloped,but the long-run AS is flat.
C)The short-run and the long-run AS are both positively sloped.
D)The short-run AS curve is positively sloped,but the long-run AS is vertical.

Question

Quizplus · Accepted Answer

In the short-run, due to factors such as sticky wages and prices, the AS curve is positively sloped. However, in the long-run, these factors adjust and the AS curve becomes vertical. Therefore, monetary policy can be effective in shifting the short-run AS curve, but not in the long-run when the AS curve becomes less responsive. Choice D accurately describes this phenomenon.

The Analysis That Monetary Policy Is Effective in the Short-Run