If an increase in the level of the money supply results in a proportionate increase in prices with no effect on any real variables,we say that

Question

Quizplus · Accepted Answer

When an increase in the level of the money supply results in a proportionate increase in prices with no effect on any real variables, we say that "money is neutral". This means that changes in the money supply have no effect on real economic variables such as output or employment, only on nominal variables like prices. Therefore, choice B is the correct answer.

If an Increase in the Level of the Money Supply