When do most economists believe the principle of monetary neutrality is relevant?
A)relevant to both the short and long run
B)irrelevant to both the short and long run
C)mostly relevant to the short run
D)mostly relevant to the long run

Question

Quizplus · Accepted Answer

Most economists believe that the principle of monetary neutrality is mostly relevant to the long run, as in the short run, monetary policies can have some impact on the real economic activity, such as output and employment, due to sticky prices and wages. However, in the long run, the principle of monetary neutrality holds, indicating that changes in the money supply do not affect the long-term potential output or productive capacity of the economy.

When Do Most Economists Believe the Principle of Monetary Neutrality