Assume the economy is initially operating at the natural level of output.Now suppose a budget is passed that calls for an increase in government spending.This increase in government spending will,in the medium run,have NO effect on which of the following?

Question

Quizplus · Accepted Answer

In the medium run, the economy returns to the natural level of output, which implies that employment returns to its natural rate, unaffected by fiscal policy changes like increased government spending.

Assume the Economy Is Initially Operating at the Natural Level