The main difference between the classical model of the price level and the modern understanding of the relationship between the money supply, the price level, and real GDP is that according to classical economists, _____, while today's economists _____.
A) money is neutral in the long run; do not consider money to be neutral in the long run.
B) the adjustment of prices takes some time; expect changes in the money supply to be instantaneous.
C) did not consider money to be neutral in the long run; consider money neutral in the long run.
D) the adjustment of prices to changes in the money supply is instantaneous; argue that this adjustment process takes some time.

Question

Quizplus · Accepted Answer

Classical economists believed that prices adjust quickly to changes in the money supply, maintaining the neutrality of money in the long run. Modern economists, however, recognize that price adjustments can take time, indicating a non-instantaneous response to changes in the money supply.

The Main Difference Between the Classical Model of the Price