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Unformatted text preview: together than real wages and real rental rates do not change. If real wages and real rental rates don’t change, then the labor and capital service markets remain in the same equilibrium as when the price level was lower, i.e. no change in employment or capital utilization. No change in factor use implies no change in real output. 3. Money has no Real Effects—Money Neutrality Money supply increases, increase dollar spending and the price level. Since the price level has no real effects than neither does the money supply....
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue.
- Spring '08