I have to do a brief presentation tomorrow on price neutrality and have to give an example of it. Please help me, thanks
2006-10-24 16:45:49 · 3 answers · asked by Anaksonamun 2 in Social Science ➔ Economics
Definitons:
The neutrality of money-- Neutrality means that neither allocations of relative prices depend on the level of the money supply. that is, multiply the money supply by any positive number alpha once and for all. You will see that the allocations will be identical, with the price level changing by alpha, and with no changes in relative prices.
Super-neutrality refers to whether changes in the growth rate of the money supply change allocations or relative prices.
That's from my notes on monetary theory. I would guess that price neutrality is similar, the level of average prices as a whole doesn't have any macro economic effects, but I could be totally wrong.
The neutrality of money is a fairly standard assumption in neo-classical economics, but deep monetary theory (money search) claims that the level of money effects the velocity of money (Randy Wright from Penn leads that field).
2006-10-24 18:05:43 · answer #1 · answered by GreenManorite 3 · 0⤊ 0⤋
Price neutrality simply refers to the fact that prices do not favor the consumer or producer. They are the unbiased result of competition
2015-03-23 02:58:42 · answer #2 · answered by Jeff T 1 · 0⤊ 0⤋
That's when the price you pay for something is considered (fair).
2006-10-24 16:51:53 · answer #3 · answered by seek_fulfill 4 · 0⤊ 0⤋