Question

Monetary neutrality, the irrelevance of the money supply in determining values of ^ variables, is generally thought to be a property of the economy in the long run.

A. Output
B. Inflation
C. Interest rates
D. Unemployment

Answer 1

In the neoclassical model of economics, monetary policy affects only the price level, not unemployment or output. An expansionary monetary policy can cause an inflationary increase in the price level, but it does not have any long-term effect on unemployment.

Step-by-step explanation:

In the neoclassical model of economics, monetary policy affects only the price level, not the level of output in the economy.

An expansionary monetary policy shifts aggregate demand, causing an inflationary increase in the price level, but it does not alter GDP or unemployment in the long run. Therefore, monetary policy has no effect on unemployment.