Which statement is NOT consistent with monetary neutrality?
A) It is most applicable to long-run situations.
B) The amount of money has no effect on the economy.
C) Changes in the money supply will change the price level.
D) Output is not affected by the money supply in the long run.

Question

Quizplus · Accepted Answer

Monetary neutrality suggests that changes in the money supply do not affect real economic variables in the long run, such as output. However, it does not claim that money has no effect on the economy at all. Instead, it primarily affects nominal variables, like the price level, rather than real output or employment.

Which Statement Is NOT Consistent with Monetary Neutrality