Money has no effect on the real economy in the long run but can have an effect in the short run.

Question

Quizplus · Accepted Answer

In the long run, money is neutral, meaning changes in the money supply only affect nominal variables (like prices) and have no effect on real variables (like real GDP). However, in the short run, changes in the money supply can influence real economic activity due to price and wage stickiness, among other factors.

Money Has No Effect on the Real Economy in the Long