Most economists believe that in the long run,changes in the money supply
A)affect nominal but not real variables.This view that money is ultimately neutral is consistent with classical theory.
B)affect nominal but not real variables.This view that money is ultimately neutral is inconsistent with classical theory.
C)affect real but not nominal variables.This view that money is ultimately neutral is consistent with classical theory.
D)affect real but not nominal variables.This view that money is ultimately neutral is inconsistent with classical theory.

Question

Quizplus · Accepted Answer

Most economists believe in the long run, changes in the money supply affect nominal variables such as prices, wages, and exchange rates, but not real variables such as real GDP, unemployment, and potential output. This view is consistent with classical theory, which suggests that the economy will eventually adjust to changes in the money supply and return to its natural level of output and employment. The neutrality of money implies that changes in the money supply do not affect real economic activity in the long run, only nominal variables.

Most Economists Believe That in the Long Run,changes in the Money