The proposition of long-run neutrality of money is supported by evidence over more than fifty years and many countries that there is a positive relationship between

Question

Quizplus · Accepted Answer

The long-run neutrality of money suggests that changes in the money supply only affect nominal variables (like inflation) in the long run, not real variables (like real GDP). The positive relationship between inflation rates and money supply growth is consistent with this proposition, as it indicates that increasing the money supply leads to higher inflation rates over time, without necessarily affecting the real output in the long run.

The Proposition of Long-Run Neutrality of Money Is Supported by Evidence