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1. a) According to the classical macroeconomic theory, money supply shocks are neutral, and this means that any change in the money supply by the central bank will not affect the real variables of the economy like the real GDP and the real wage rate and real interest rate. In the situation of money supply changing it would affect the nominal variables such as the price level inflation rate and the dollar wage earned by people. This is referred to as Monetary neutrality....

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