The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.

Question

Quizplus · Accepted Answer

The classical notion of monetary neutrality posits that changes in the money supply have no long-term effects on real variables like output or employment, which is consistent with a vertical long-run aggregate-supply curve (indicating that output is determined by factors other than the price level in the long run) and a vertical long-run Phillips curve (suggesting that inflation does not affect unemployment in the long run).

The Classical Notion of Monetary Neutrality Is Consistent Both with a Vertical