The Reds have been tipped to push the Citizens all the way in this season's Premier League title race after spending big to strengthen their squad.
Liverpool can also hold claim to beating Man City in three of last term's four meetings in all competitions, but former midfielder Murphy reckons that Mohamed Salah and Virgil van Dijk are the only players good enough to cross the divide.
Speaking to talkSPORT, the 41-year-old said: "Fabinho, [Naby] Keita, Alisson [Becker] are all good players and they give Liverpool strength in depth and competition for places, which does increase performance, but would any of those players get in City's team?
"Salah and Van Dijk would get in City's team. Other than that, probably no others. You can't base your transfer policy on buying better players than City have. It is nearly impossible. You can't buy a better player than [Kevin] De Bruyne in midfield, so you have to compete in a different way.
"What I like that Klopp has done is he has signed quality where he has needed it – the middle of the park they were lacking - there is great competition for places and he did it early. [Xherdan] Shaqiri is a good 'un as well. That is not bad business the money they have spent there.
"He had a good World Cup and he will create competition for places. Liverpool have done really well and will bridge the gap with City."
Man City kicked off their 2018-19 campaign by beating Chelsea 2-0 in the Community Shield on Sunday afternoon.