Final answer:
In the neoclassical view, monetary policy affects price levels but not long-term output or real GDP in the economy, which aligns with the rational expectations hypothesis. Hence, the statement is A.True.
Step-by-step explanation:
The statement that in the long run, the reduction in the money supply affects the price level but not the level of output is rooted in the neoclassical view of monetary policy. According to this view, while a reduction in the money supply might change the price level, it does not have a long-term impact on the real GDP or the level of output in the economy. This is because in the neoclassical model, the economy adjusts to a new equilibrium that reflects the changes in the price level but keeps the output consistent with the full employment level.
Furthermore, the rational expectations hypothesis suggests that individuals use all available information to anticipate the effects of monetary policy and adjust accordingly, which means that monetary policy would have no long-term effect on real output. Thus, considering the provided information, the correct option is A.True.