How is monetary policy useful if money is neutral

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Reference no: EM131199030

1. 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 nat- ural level of output. Why then is monetary policy consid- ered neutral but fiscal policy is not?

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

Reference no: EM131199030

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