In the coordination failure model,
A) money supply rises.
B) money is not neutral.
C) money is neutral.
D) money is dictated by politics.
E) money supply is unpredictable.

Question

Quizplus · Accepted Answer

In the coordination failure model, money is neutral. This means that changes in the money supply do not affect the real economy in the long run, but only have temporary effects on prices and output in the short run. The coordination failure model focuses on how expectations and coordination problems among economic agents can lead to inefficiencies and suboptimal outcomes in the economy, regardless of the level of money supply.

In the Coordination Failure Model