If the long- run neutrality of money holds, then an increase in the money supply will _______ investment and output in the long run.
A) increase
B) decrease
C) have no effect
D) increase or decrease

Question

Quizplus · Accepted Answer

According to the long-run neutrality of money, changes in the money supply have no effect on real variables such as investment and output in the long run. Therefore, none of the options A, B, or D are correct. The correct option is C, which states that an increase in the money supply will have no effect on investment and output in the long run.

If the Long- Run Neutrality of Money Holds, Then an Increase