According to most economists, changes in the money supply.......?

Question

2. Most economists believe that classical theory describes the world in the long run but not in the short run.

According to most economists, changes in the money supply:

A. Can affect real GDP in both the short run and the long run

B. Can affect real GDP in the short run, but not the long run

C. Can affect real GDP in the long run, but not the short run

D. Have no impact on real GDP in either the short run or the long run

Answer 1

B. Can affect real GDP in the short run, but not the long run

Money are neutral in long-run for real economy while in short-run it can stimulate GDP.

Answer 2

B. Can affect real GDP in the short run, but not the long run

{Actually, it depends: in a situation of shortrun aggregate demand < shortrun aggregate supply, increase in money supply can help increase real gdp. Longrun real gdp can also go up with increase in money supply if the interest rate reduces following higher money supply and encourage investments that help augment potential gdp for the future periods}