The classical dichotomy refers to the separation of
A)prices and nominal interest rates.
B)taxes and government spending.
C)decisions made by the public and decisions made by the government.
D)real and nominal variables.

Question

Quizplus · Accepted Answer

The classical dichotomy refers to the separation of real and nominal variables. In classical economics, real variables, such as output and employment, are determined by factors such as technology and the availability of resources, while nominal variables, such as prices and wages, are determined by the money supply and demand for goods and services. Therefore, the correct answer is D, which refers specifically to the separation of real and nominal variables.

The Classical Dichotomy Refers to the Separation of