Monetary Policy - Money output, and Prices in the long run - Money neutrality

7 important questions on Monetary Policy - Money output, and Prices in the long run - Money neutrality

What do we call it when changes in the money supply have no real effects on the economy?

Money neutrality

What doe the left had side M*V show

It shows the amount of dollars spent on final goods and services

What happens when the central bank increases the level of money supply? Assuming velocity constant?

The total amount of dallars spent of dollars spent on final goods products M*V rises
the nominal GDP will rise.
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What difference does a change in money supply make in nominal terms, and real terms

The money supply may change nominal wages, prices, nominal GDP however in the long run the real wages, real GDP, and the real value of  the money supply does not change

How is the quantity equation given?

M= the level of the nominal money supply
V= velocity of money (the average number of times a dollar is spent per period)
P= aggregate price level
Y= aggregate real output (real income)

What does the right hand side P*Y mean?

measures the nominal GDP

Will the real GDP increase in the long run when the money supply increases? What are the only factors that shift real GDP?

Total factor productivity
stocks of productive inputs
physical and human capital and labor

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