When economists say that money is neutral, this means that: A. a change in the money supply changes nominal variables but not real variables. B. a change in the money supply changes real variables but not nominal variables. C. a change in the money supply has no effect on the economy. D. a change in the money supply will stall the economy, preventing further growth.

Question

Business

Dominick Levy

21 February, 18:37

When economists say that money is neutral, this means that: A. a change in the money supply changes nominal variables but not real variables. B. a change in the money supply changes real variables but not nominal variables. C. a change in the money supply has no effect on the economy. D. a change in the money supply will stall the economy, preventing further growth.

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Answers (2)

Know the Answer?

Julius Richardson · Answer 1

B. a change in the money supply changes real variables but not nominal variables

Explanation:

Money neutrality is an economic theory that says that money supply only affects nominal varabmles but not real variables.

Layne Gross · Answer 2

Answer: A. a change in the money supply changes nominal variables but not real variables

Explanation:

Neutrality of money is also referred to as neutral money, and it is an economic theory which means that the changes in the money supply can only affect the nominal variables but the real variables will not be affected.

This means that the change in money supply will affect prices and wages but the structure or the output of the economy can not be affected.