Monetary neutrality implies that an increase in the quantity of money will
A)increase employment.
B)increase the price level.
C)increase the incentive to save.
D)increase the real interest rate.

Question

Quizplus · Accepted Answer

Monetary neutrality suggests that changes in the quantity of money only affect nominal variables, such as the price level, without affecting real variables, such as employment or the real interest rate. Therefore, an increase in the quantity of money will lead to an increase in the price level but will not affect the other options listed.

Monetary Neutrality Implies That an Increase in the Quantity of Money