According to monetary neutrality and the Fisher effect,an increase in the money supply growth rate eventually increases
A)inflation and nominal interest rates,but does not change real interest rates.
B)inflation,nominal interest rates,and real interest rates.
C)inflation and real interest rates,but does not change nominal interest rates.
D)nominal interest rates and real interest rates,but does not change inflation.

Question

Quizplus · Accepted Answer

Monetary neutrality suggests that in the long-run, changes in the money supply growth rate have no effect on real variables such as output and employment. According to the Fisher effect, an increase in the money supply growth rate leads to an increase in inflation and nominal interest rates but does not affect real interest rates. Therefore, the correct choice is A, as it correctly states that an increase in the money supply growth rate eventually increases inflation and nominal interest rates but does not change real interest rates.

According to Monetary Neutrality and the Fisher Effect,an Increase in the Money