Money is neutral in both the short and long runs,if we assume
A)people form their expectations based on the rational expectations hypothesis.
B)people forecast the effect of the money supply correctly.
C)people never make mistake when they make forecast.
D)the change of money supply is unanticipated.

Question

Quizplus · Accepted Answer

Under the rational expectations hypothesis, people use all available information to forecast economic variables, including the effects of monetary policy, leading to the neutrality of money in both the short and long run.

Money Is Neutral in Both the Short and Long Runs,if