Assuming that money is neutral,a reduction in the nominal money supply would cause
A)an excess demand for goods.
B)a decrease in the real money supply.
C)a fall in the price level.
D)a rise in nominal wages.

Question

Quizplus · Accepted Answer

Assuming that money is neutral, a reduction in the nominal money supply would cause a fall in the price level. This is because the amount of money available to spend on goods and services has decreased, leading to a decrease in aggregate demand. As a result, firms may need to lower their prices in order to sell their goods and services. This leads to a decrease in the general price level.

Assuming That Money Is Neutral,a Reduction in the Nominal Money