从长期来看，名义货币供应量对产出水平和利率没有影响。由于这个原因，金钱是中性的。如果名义货币供应量增加，则会导致物价水平按比例上升。IS曲线的位置和自然产出水平决定利率。不会对利率和投资产生影响，因为is曲线没有变化。因此，不会对产出水平产生影响。从长远来看，这表明货币政策是无效的。货币政策是外生的，对is曲线没有影响。由于LM货币政策的扩张性，曲线向右平移。它导致低利率和高投资。经济将沿着IS曲线下行，对消费产生乘数效应。此外，在LM曲线的平坦部分，货币政策是无效的。在这部分，利率接近于零。这种情况被称为流动性陷阱(Kim, Morse &Zingales, 2006)。
In the long run, nominal money supply has no impact on the level of output and rate of interest. Due to this reason, money is neutral. If nominal money supply increases than it leads to the proportionate hike in the level of prices. The position of IS curve and the natural level of output decide the interest rate. There will be no impact on the interest rate and investment because there is no change in the IS curve. As a result, there will be no impact on the level of output. It shows the ineffectiveness of monetary policy in the long run.Monetary policy is exogenous in nature which means it has no impact on IS curve. Due to expansionary monetary policy LM, curve shifts to right. It results in low interest rates and high investment. The economy will move down along with IS curve with multiplier effect on consumption.In addition, on the flat part of LM curve monetary policy is ineffective. At this part, the interest rates are close to zero. This situation is known as liquidity trap (Kim, Morse &Zingales, 2006).
When consumer who prefers more cashes than the rate at the quantity of money is growing, the situation is known as liquidity trap. As a result, increasing in money supply to induce consumers who hold non-liquid assets will not work.The classic example of liquidity trap is the situation of UK in March 2009. In this period, the base interest rates were cut to 5%. After remaining in recession for a considerable time, UK adopted devaluation in the Pound. This led to a weak recovery. However, in the years 2011-12, the economy experienced a fall in the rate of economic growth.Money is a unit of account, which is irrelevant for the real variables. For example in case of high inflation, a new currency is introduced. Monetary neutrality is the property that shows that money does not affect the real variables. This means that any change in the nominal money supply leads to the proportionate change in nominal variables but not in the real variables. Disturbances in real variables like change in technology etc. can only change the real side like growth, employment etc (Klemenčič, 2014).