1. The neutrality of money
a. In what sense is money neutral? How is monetary policy useful if money is neutral?
b. Fiscal policy, like monetary policy, cannot change the nat- ural level of output. Why then is monetary policy consid- ered neutral but fiscal policy is not?
c. Discuss the statement "Because neither fiscal nor mon- etary policy can affect the natural level of output, it follows that, in the medium run, the natural level of output is in- dependent of all government policies."