The theoretical separation of real and monetary variables is called:
A) the classical dichotomy.
B) monetary neutrality.
C) the Fisher effect.
D) the quantity theory of money.

Question

Quizplus · Accepted Answer

The classical dichotomy is the theoretical separation of real and monetary variables, which is a central concept in classical economics. It suggests that changes in the money supply will only affect nominal variables, such as prices and wages, but will not have any effect on real variables, such as output and employment.

The Theoretical Separation of Real and Monetary Variables Is Called