An increase in money supply will increase <u>the price level, but not real GDP. </u> This is the principle of monetary neutrality.
The actual Gross Domestic Product or GDP won't change even if the money supply increases and the price level does as well since, according to the monetary neutrality, changes in the money supply have actually no impact on real variables.
Also, in principle of monetary neutrality, changes in the money supply can have a temporary impact on employment and production, which are part of real GDP or actual economic variables.
The neutrality of money, often known as neutral money, is a theory that contends that, rather than actual economic variables, changes in the money supply might have an impact on the pricing of goods and services but the economy's fundamental structure and circumstances remain unchanged.
More on classical dichotomy and monetary neutrality here: brainly.com/question/27389663
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