If prices and wages adjusted rapidly and producers could quickly distinguish the difference between a change in the price level and a change in the relative price of their products, then an increase in the money supply growth rate would have at most a very short-lived affect on unemployment.

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In such a scenario, the economy would quickly adjust to the new money supply through price and wage changes, minimizing the impact on real variables like unemployment. This is consistent with classical economic theory, which posits that money is neutral in the long run.

If Prices and Wages Adjusted Rapidly and Producers Could Quickly