Empirically, a large amount of evidence suggests that money neutrality ________, but changes in money supply ________.
A) holds in the short run; do not affect nominal variables
B) does not hold in the long run; can have real effects in the short run
C) holds in the short run; can have real effects in the long run
D) holds in the long run; can have real effects in the short run
E) does not hold in the long run; have an effect on unemployment in the long run

Question

Quizplus · Accepted Answer

Money neutrality typically holds in the long run, meaning changes in the money supply do not affect real economic variables in the long run. However, in the short run, changes in the money supply can have real effects on the economy, such as impacting output and employment.

Empirically, a Large Amount of Evidence Suggests That Money Neutrality