While price misperceptions can cause an increase in labour supply and GDP in the short-run, in the long run:
A)money is neutral.
B)money negatively affects real GDP.
C)labour supply ultimately declines.
D)all of the above.

Question

Quizplus · Accepted Answer

In the long run, money is neutral, meaning that changes in the money supply do not affect real variables like GDP or the aggregate price level. Although price misperceptions may cause a temporary increase in labour supply and GDP, these effects will eventually dissipate and return to their natural levels. Therefore, there is no long-term impact on labour supply or GDP.

While Price Misperceptions Can Cause an Increase in Labour Supply