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present an analysis where you examine the long term impact of an increase in the money...

present an analysis where you examine the long term impact of an increase in the money supply. use your analysis to explain why increases in the money supply may explain the observed changes in both product prices and nominal wage levels over time. also, use your analysis to explain (using words) what it means when macroeconomists say money is neutral

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Answer - The increase in the money supply in the long run will increase the value of AD in the economy. This increased demand will shift the AD towards right and will increase the price level in the economy . The output will also increase. The increase in output will demand more labor. Because if this , the wages in the market will also increase.

The money neutrality concept states that the money affects only the nominal variables such as the price level , output and the exchange rate. It is not able to influence the real consumption and real GDP. Hence the money is neutral.

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