Under an assumption of monetary neutrality,a change in the nominal money supply has
A)no effect on the price level.
B)a less than proportionate effect on the price level.
C)a proportionate effect on the price level.
D)a more than proportionate effect on the price level.

Question

Quizplus · Accepted Answer

Under the assumption of monetary neutrality, a change in the nominal money supply is believed to have a proportionate effect on the price level, meaning that if the money supply doubles, the price level is also expected to double, leaving real variables unaffected in the long run.

Under an Assumption of Monetary Neutrality,a Change in the Nominal