Expansionary monetary policy can have immediate real short-run effects; initially,no prices have adjusted.But as prices adjust in the long run:
A) the real impact of monetary policy is multiplied.
B) the real impact of monetary policy is negative.
C) the real impact of monetary policy is cut in half.
D) the real impact of monetary policy dissipates completely.
E) the real impact of monetary policy is unknown.

Question

Quizplus · Accepted Answer

In the long run, prices and wages adjust to the changes in the money supply, leading to no real impact on output or employment, as predicted by the classical dichotomy and neutrality of money.

Expansionary Monetary Policy Can Have Immediate Real Short-Run Effects; Initially,no