When economists state that "money is neutral," they mean that the:
A) overall price level has no effect on consumers;only relative prices do.
B) overall price level has no effect on people's inflation expectations.
C) money supply does not affect inflation or nominal GDP.
D) money supply does not affect real GDP or unemployment.

Question

Quizplus · Accepted Answer

The statement that "money is neutral" implies that changes in the money supply do not have an impact on real variables such as real GDP or unemployment in the long run. Instead, changes in the money supply primarily affect nominal variables like the price level.

When Economists State That "Money Is Neutral," They Mean That