What Is the Difference Between the Effects of Fiscal Policy

question 39

Multiple Choice

What is the difference between the effects of fiscal policy and the effects of monetary policy?

• A) Monetary policy can affect long-term growth while fiscal policy cannot.
• B) Fiscal policy can affect the short-term price level while monetary policy cannot.
• C) Fiscal policy can affect long-term growth while monetary policy cannot.
• D) Monetary policy can affect the short-term level of output while fiscal policy cannot.

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Definitions:

Total Output

The total quantity of goods or services produced by a firm or country within a specific period.

Economic Expansion

A phase in the business cycle where the economy grows and increases its output, characterized by a rise in employment, consumer spending, and production.

Mild Recession

A period of slight economic decline wherein the economy's growth slows down, but the downturn is not severe enough to be classified as a full recession.

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product much faster than with traditional manufacturing methods.