During a bout of hyperinflation, suppose the country of Weimar announces it will be rolling out a new currency, the Weimar Mark, which is worth 1 million Marks. Neutrality of money suggests this change will:
A) not influence prices in the overall economy.
B) dramatically decrease real wealth.
C) only change core inflation.
D) None of these are true.

Question

Quizplus · Accepted Answer

Neutrality of money implies that changes in the money supply will not affect real variables such as output, employment or real GDP. Therefore, under neutrality of money, the roll-out of the new Weimar Mark will not influence prices in the overall economy.

During a Bout of Hyperinflation, Suppose the Country of Weimar