According to the principle of monetary neutrality, which of the following will a decrease in the money supply NOT change?
A)nominal GDP
B)the price level
C)unemployment
D)the nominal wage rate

Question

Quizplus · Accepted Answer

The principle of monetary neutrality states that changes in the money supply will only affect nominal variables and not real variables. Nominal GDP (A), the price level (B), and the nominal wage rate (D) are all nominal variables that can be affected by changes in the money supply. However, unemployment (C) is a real variable that is determined by factors other than the money supply, such as technological progress, labor market policies, and structural changes in the economy. Therefore, a decrease in the money supply will not necessarily change the unemployment rate.

According to the Principle of Monetary Neutrality, Which of the Following