Fiscal Policy Is Neutral in the Long Run Because

question 74

Multiple Choice

Fiscal policy is neutral in the long run because

• A) the stimulus translates into contractionary monetary policy that dampens investment and negates the policy.
• B) the expansion of GDP causes interest rates to climb and thereby lowers investment and cancels the stimulus.
• C) increases in government spending always cause higher deficits, public outrage at the debt, and subsequent higher taxes or program rollbacks that cancel the initial stimulus.
• D) the political business cycle is manipulated to try to produce recovery from recession during election years.
• E) none of the above.

---

Definitions:

Societal Inequality

The existence of unequal opportunities and rewards for different social positions or statuses within a society.

Sex

An individual’s membership in one of two categories—male or female—based on biological factors.

Gender

A social construct that refers to roles, behaviors, activities, expectations, and identities that societies consider appropriate for men and women.

Educational Attainment

The highest level of education an individual has completed, often used as a measure of social progress.