The idea that aggregate price levels do not affect real outcomes in the economy is called the:
A) neutrality of money.
B) aggregate price theory.
C) neutrality of prices.
D) real output theory.

Question

Quizplus · Accepted Answer

The idea that changes in aggregate price levels (inflation/deflation) do not affect real economic variables such as employment, output, and production is known as the neutrality of money. The theory suggests that changes in the money supply only have an effect on nominal variables like price levels and nominal GDP, but not real variables like output levels and employment rates.

The Idea That Aggregate Price Levels Do Not Affect Real