According to the principle of monetary neutrality,what will an increase in the quantity of money also increase?
A)employment
B)the price level
C)the incentive to save
D)labour productivity

Question

Quizplus · Accepted Answer

According to the principle of monetary neutrality, an increase in the quantity of money will only affect nominal variables, such as the price level. Real variables, such as employment and labour productivity, will not be affected in the long-run. Therefore, the only correct answer is B, as an increase in the quantity of money will lead to an increase in the price level. The other options are incorrect as they do not reflect the principle of monetary neutrality.

According to the Principle of Monetary Neutrality,what Will an Increase