According to the Theory Based on Rational Expectations and Flexible

question 113

Multiple Choice

According to the theory based on rational expectations and flexible wages and prices,

• A) fiscal policy has less effect on real GDP than monetary policy in the long run.
• B) monetary policy has less effect on real GDP than fiscal policy in the long run.
• C) neither fiscal nor monetary policy influence real GDP in the long run.
• D) only the combination of discretionary fiscal policy and conservative monetary policy can affect real GDP in the long run.