is lm

[maahi]

Fiscal policy cannot affect output in the long run"??  true / false

true :: increase in g --> increase dd fr labor n employment  --> AS shifts right --> output increases

false ::increase in G --> inflationary --> LM shifts left --> o/p remains same

where am i wrong ???

[MR]

Hey Maahi,
An expansionary fiscal policy will not effect output in the long run as in the long run the economy operates at the natural level of output. I found this link http://wps.aw.com/wps/media/objects/3000/3072633/bonuschapters/webch02.pdf. See page 15-16 for further clarification with graph. :)

[maahi]

thanks . i thought so just wanted to confirm .