Money will not be neutral in the short run in the AD-AS model when prices and wages are sticky.

Question

Quizplus · Accepted Answer

When prices and wages are sticky in the short run, changes in the money supply will have an effect on real output and employment, as firms and households adjust to the new relative prices and nominal incomes. In other words, monetary policy can have a real impact on the economy, rather than just altering the price level as in the long run.

Money Will Not Be Neutral in the Short Run in the AD-AS