Which of the following best describes the policy ineffectiveness proposition?
A) monetary policy cannot change real GDP in a regular or predictable way
B) policymakers can be effective in changing real GDP only if people's expectations are correct
C) monetary policy can change real GDP only if the Fed pursues a consistent, stable growth rate of the real money supply
D) fiscal policy is totally ineffective in changing real GDP in both the short run and the long run

Question

Quizplus · Accepted Answer

The policy ineffectiveness proposition is the idea that monetary policy cannot change real GDP in a regular or predictable way. The proposition, developed by economist Thomas Sargent, suggests that people's expectations can change in response to policy, making it difficult for policymakers to achieve their goals. Therefore, option A is the best choice as it accurately describes this concept.

Which of the Following Best Describes the Policy Ineffectiveness Proposition