In the long-run, changes in the money supply will change prices but not real GDP or interest rates.

Question

Quizplus · Accepted Answer

In the long-run, according to classical economic theory, changes in the money supply are neutral, affecting only prices (inflation or deflation) but not real GDP, which is determined by real factors like technology and resources, or interest rates, which are determined by the supply and demand for loanable funds.

In the Long-Run, Changes in the Money Supply Will Change