Final answer:
In the basic classical model, money is considered neutral in the long run but may have short-run nonneutral effects.
Step-by-step explanation:
The conclusion that the basic classical model allows about the neutrality or nonneutrality of money is that money is neutral in the long run, meaning it does not affect real variables like output or employment, but it can affect these variables in the short run. In the neoclassical view, a monetary policy will only change the price level but not the level of output or the unemployment rate in the long run.
The basic classical model suggests that money is neutral in the long run, as monetary policy only affects the price level, not output. An expansionary monetary policy may cause short-run inflation, but it does not have an impact on output or unemployment in the long run.
The basic classical model, with no misperceptions of the price level, suggests that money is neutral in the long run. In the neoclassical view, monetary policy influences only the price level, not the level of output in the economy. An expansionary monetary policy may cause inflationary increases in the price level in the short run, but it does not affect output or the unemployment rate in the long run.
Hence, the correct answer to the student's question is D. Money is nonneutral in the short run, but neutral in the long run.