How is monetary policy useful if money is neutral

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The neutrality of money

a. In what sense is money neutral? How is monetary policy useful if money is neutral?

b. Fiscal policy, like monetary policy, cannot change the natural level of output. Why then is monetary policy considered neutral but fiscal policy is not?

c. Discuss the statement "Because neither fiscal nor monetary policy can affect the natural level of output, it follows that, in the medium run, the natural level of output is independent of all government policies."

Reference no: EM131145784

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