Classical economist David Hume observed that as the money supply expanded after gold discoveries it took some time for prices to rise and in the meantime the economy enjoyed higher employment and production.This is inconsistent with monetary neutrality because
A)monetary neutrality would mean that neither prices nor production should have risen.
B)monetary neutrality would mean that production should have risen,but prices should not have.
C)monetary neutrality would mean the prices should have risen,but production should not have changed.
D)monetary neutrality would mean that prices and production should both have fallen.

Question

Quizplus · Accepted Answer

Monetary neutrality suggests that changes in the money supply only affect nominal variables like prices, not real variables like production.

Classical Economist David Hume Observed That as the Money Supply