Question

. Explaining short-run economic fluctuations

Most economists believe that real economic variables and nominal economic variables behave independently of each other in the long run.

For example, an increase in the money supply, a    variable, will cause the price level, a    variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a    variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as    .

Answer 1

The notion that an increase in the quantity of money will impact the price level but not the output level is known as monetary neutrality.