Asked by Kayla Taylor on Jun 29, 2024
Verified
The classical notion of monetary neutrality is consistent both with a vertical long-run aggregate-supply curve and with a vertical long-run Phillips curve.
Classical Notion
An economic theory advocating for free markets, competition, and minimal government intervention in the economy.
Monetary Neutrality
The proposition that changes in the money supply do not affect real variables.
Long-Run Phillips
An economic concept suggesting that there is no long-term trade-off between inflation and unemployment, contrary to the short-run Phillips curve.
- Acquire knowledge about the notion of monetary neutrality and its implications over an extended period.
- Understand the significance of the classical dichotomy and its relevance to contemporary economic policy.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
True
Explanation :
The classical notion of monetary neutrality posits that changes in the money supply have no long-term effects on real variables like output or employment, which is consistent with a vertical long-run aggregate-supply curve (indicating that output is determined by factors other than the price level in the long run) and a vertical long-run Phillips curve (suggesting that inflation does not affect unemployment in the long run).
Learning Objectives
- Acquire knowledge about the notion of monetary neutrality and its implications over an extended period.
- Understand the significance of the classical dichotomy and its relevance to contemporary economic policy.
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