Monetary neutrality refers to the idea that changes in the money supply only affect nominal variables (like the price level) and not real variables (like real GDP) in the long run. Therefore, none of the options accurately describe monetary neutrality.

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Monetary Neutrality

Question 20

Multiple Choice

Monetary neutrality:

A) means that a change in the money supply will affect both real GDP and the price level.
B) definitely applies in the short run.
C) means that a change in the money supply will affect real GDP, but will not affect the price level.
D) none of the above

Correct Answer: