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Neutrality and Supernuetrality of Money

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What is mean by "neutrality" or "superneutrality" of money? Give examples and discuss when they are likely.

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Neutrality and supernuetrality of money

Please note:
- this is a master's level, so please explain every step you make in you answer.
-If you think you could give me a fully perfect answer for this question, then let me know and I'll restrict the posting for you.

Question:
What is mean by "neutrality" or "superneutrality" of money? Give examples and discuss when they are likely.

The neutrality of money emanates from classical economics. The main crux of the idea is that if there is a change in the stock of money, that change only influences the nominal variables like wages, exchange rates and prices. In other words it means that the change in the stock of money does not influence consumption, employment or the GDP. There are several implication of neutrality of money. One implication is that if there is any increase in the supply of money this increase would be balanced by an equal increase in prices and wages. Another implication is that the actions of Federal Reserve or the central bank cannot influence the real economy. In other words the actions of the central bank cannot create additional ...

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Hatim Baxamusa, MBA
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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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