The Federal Reserve expands the money supply by 5%. In the long run in this scenario, is money neutral? Money is always neutral in the long run. Money is never neutral in the long run. While there might be scenarios in which money is not neutral in the long run, this scenario is one in which money is neutral. Money is neutral in the long run in this scenario if lower interest rates lead to investment but that investment does not successfully create capital. If the investment is successful, money is not neutral in this scenario.

The Federal Reserve expands the money supply by 5%. In the long run in this scenario, is money neutral? Money is always neutral in the long run. Money is never neutral in the long run. While there might be scenarios in which money is not neutral in the long run, this scenario is one in which money is neutral. Money is neutral in the long run in this scenario if lower interest rates lead to investment but that investment does not successfully create capital. If the investment is successful, money is not neutral in this scenario.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter16: Monetary Policy

Section: Chapter Questions

Problem 1SQP

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