Classical economists would explain the fact that money is a leading,procyclical macroeconomic variable by pointing out that
A)money is not neutral,and changes in the nominal money supply affect real variables.
B)increasing the money supply shifts the LM curve,reducing real interest rates and causing an economic expansion.
C)increasing the money supply increases aggregate demand,causing higher levels of employment and output.
D)when money demand rises because of a beneficial productivity shock,the Central Bank increases the money supply to prevent the price level from falling.

Question

Quizplus · Accepted Answer

Classical economists believe in the neutrality of money, meaning changes in the money supply do not affect real variables in the long run. However, they might argue that money is procyclical because the Central Bank adjusts the money supply in response to changes in money demand due to productivity shocks, to stabilize the price level.

Classical Economists Would Explain the Fact That Money Is a Leading,procyclical