The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run. O True b. False

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05-12-2022
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The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run. O True b. False

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NomulaHarshidn NomulaHarshidn · Answer 1 · 2022-12-10T17:07:18-05:00

The irrelevance of monetary changes for real variables is called monetary neutrality. Most economists accept monetary neutrality as a good description of the economy in the long run, but not the short run

This statement is TRUE

What is Money neutrality?

According to the notion of money neutrality, commonly known as neutral money, changes in the money supply only have an impact on nominal variables and not actual variables.

In other words, the Federal Reserve (Fed) and central banks' printing of money can affect prices and wages but not the economy's output or structure.

Although many modern economists continue to hold the view that neutrality is assumed in the long run once money has circulated throughout the economy, modern versions of the theory acknowledge that changes in the money supply might have an impact on output or unemployment levels in the short term.

Learn about Money Neutrality from the link below

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