What is an implication of the neutrality of money in the long run? The economy's level of potential output will adjust to accommodate any change in the money supply. Changes to the money supply have no effect on either the price level or real GDP. In response to any change in the money supply, the demand for money will adjust to cancel out its effects on all macroeconomic variables. Changes to the money supply never have any effect on real GDP. In response to any change in the money supply, the economy's adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply.
What is an implication of the neutrality of money in the long run? The economy's level of potential output will adjust to accommodate any change in the money supply. Changes to the money supply have no effect on either the price level or real GDP. In response to any change in the money supply, the demand for money will adjust to cancel out its effects on all macroeconomic variables. Changes to the money supply never have any effect on real GDP. In response to any change in the money supply, the economy's adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply.
Chapter20: Monetary Policy
Section: Chapter Questions
Problem 4SQP
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23. What is an implication of the neutrality of money in the long run?
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The economy's level of potential output will adjust to accommodate any change in the money supply.
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Changes to the money supply have no effect on either the
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In response to any change in the money supply, the demand for money will adjust to cancel out its effects on all
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Changes to the money supply never have any effect on real GDP.
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In response to any change in the money supply, the economy's adjustment process will bring Y back to Y*, which is unaffected by the change in the money supply.
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