6. Judging by the impact of the money supply on nominal and real wages, is this analysis consistent with the proposition that money has real eects in…

6. Judging by the impact of the money supply on nominal and real wages, is this analysis consistent with the proposition that money has real eects in the short-run but is neutral in the long run? Yes, this analysis is consistent with long-run monetary neutrality. In the long run, an increase in the money supply causes an increase in the nominal wage, but leaves the real wage unchanged. (b) Suppose the Fed expands the money supply, but because the public expect this Fed action, it simultaneously raises its expectation of the price level. What will happen to output and the price level in the short run?





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