The neutrality of money refers to
A)the inability of changes in the money supply to affect the nominal interest rate, even in the long run.
B)the inability of changes in the money supply to affect the price level, even in the long run.
C)the fact that in the long run any percentage increase in the money supply leads to an equal percentage increase in the price level.
D)the fact that in the long run any percentage increase in the money supply leads to an equal percentage increase in the nominal interest rate.

Question

Quizplus · Accepted Answer

The neutrality of money concept suggests that changes in the money supply only affect nominal variables (like the price level) in the long run, not real variables (like real GDP). Thus, a percentage increase in the money supply is expected to lead to an equal percentage increase in the price level, according to this theory.

The Neutrality of Money Refers to