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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

    Solution

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

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