The idea that the money supply does not affect real economic variables is called
A) adaptive expectations theory.
B) monetary neutrality.
C) the Phillips curve.
D) contractionary monetary policy.
E) expansionary monetary policy.

Question

Quizplus · Accepted Answer

Monetary neutrality refers to the idea that changes in the money supply do not have a long-term impact on real economic variables such as output and employment, but only affect the price level. This view is consistent with the classical dichotomy and the quantity theory of money.

The Idea That the Money Supply Does Not Affect Real