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Question

If money is neutral,

A an increase in the money supply does nothing. Correct Answer Incorrect Answer
B a change in the money supply only affects real variables such as real output. Correct Answer Incorrect Answer
C a change in the money supply reduces velocity proportionately; therefore there is no effect on either prices or real output. Correct Answer Incorrect Answer
D a change in the money supply only affects nominal variables such as prices and wages. Correct Answer Incorrect Answer
E the money supply cannot be changed because it is tied to a commodity such as gold. Correct Answer Incorrect Answer

Solution

If money is neutral a change in the money supply only affects nominal variables such as prices and wages.

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