Policy ineffectiveness refers to the hypothesis that monetary and fiscal policy actions that change aggregate demand will
a. neither affect output nor employment even in the short run.
b. affect output and employment in both the short run and long run.
c. affect output but not employment in the short run.
d. not affect output but will affect employment in the long run.
Question 2
An increase in credit market frictions
A) decreases labor supply.
B) decreases labor demand.
C) decreases consumption demand.
D) decreases investment demand.
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