Most economists believe that money neutrality holds
A)in the short run but not the long run.
B)in the long run but not the short run.
C)in both the short run and the long run.
D)in neither the short run nor the long run.

Question

Quizplus · Accepted Answer

Money neutrality refers to the idea that changes in the money supply do not affect real variables such as output or employment in the long run, but only affect nominal variables such as prices. This view is widely accepted by economists and supported by empirical evidence, but it does not hold in the short run when prices and wages may be adjusted slowly or imperfectly, leading to real effects of monetary policy. Therefore, option B correctly reflects the consensus view on money neutrality.

Most Economists Believe That Money Neutrality Holds