If money is neutral
A) An increase in the money supply does nothing.
B) A change in the money supply only affects real variables such as real output.
C) A change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output.
D) A change in the money supply only affects nominal variables such as prices and wages.
E) The money supply cannot be changed because it is tied to a commodity such as gold.

Question

Quizplus · Accepted Answer

When money is neutral, changes in the money supply only affect nominal variables like prices and wages, not real variables like real output.

If Money Is Neutral