When is an expansionary monetary policy likely to increase real output more than just temporarily?
A)when actual output is beyond the economy's long-run capacity
B)at virtually any output level
C)when the economy is at full employment
D)when the economy operates at less than capacity

Question

Quizplus · Accepted Answer

An expansionary monetary policy is likely to increase real output more than just temporarily when the economy operates at less than capacity. This is because there is still room for the economy to grow and expand without causing inflationary pressures. Once the economy reaches its long-run capacity, further expansionary policies may lead to inflation instead of higher output in the long run. Therefore, it is important for policymakers to carefully monitor the economy and adjust their policies accordingly.

When Is an Expansionary Monetary Policy Likely to Increase Real