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Unformatted text preview: Now assume the Bank of Canada increases the money supply so that all price, including the price of labour double o Your wage is $14 per hour, but a large pizza costs $28 o In real terms, nothing has changed o You still must work two hours to afford a large pizza o This illustrates the concept of monetary neutrality o Changes in the money supply affect nominal variables, such as you wage rate measured in dollars, but not real variables, such as the purchasing power of your wage...
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This note was uploaded on 10/21/2010 for the course ECON 102 taught by Professor ? during the Fall '08 term at Waterloo.
- Fall '08