Refer to the information provided in Figure 18.1 below to answer the questions that follow. Figure 18.1
-Refer to Figure 18.1.According to monetarists,an expansionary fiscal policy in the long run and after all the adjustments have been made
A)does not increase equilibrium output or the price level.
B)increases equilibrium output above Y1,but does not change the price level.
C)increases the price level above P1,but does not change equilibrium output.
D)increases equilibrium output above Y1 and decreases the price level below P1.

Question

Refer to the information provided in Figure 18.1 below to answer the questions that follow.  Figure 18.1
-Refer to Figure 18.1.According to monetarists,an expansionary fiscal policy in the long run and after all the adjustments have been made
A)does not increase equilibrium output or the price level. 
B)increases equilibrium output above Y1,but does not change the price level. 
C)increases the price level above P1,but does not change equilibrium output. 
D)increases equilibrium output above Y1 and decreases the price level below P1.

Quizplus · Accepted Answer

Monetarists believe that in the long run, the economy is self-correcting and will return to its natural level of output. Therefore, expansionary fiscal policy will only lead to an increase in the price level, not in equilibrium output.

Refer to the Information Provided in Figure 18