Which of the following is true about the classical theory and the monetarist theory with
Regards to the impact of changes in the money supply on the economy?
A) Both the classical theory and monetarism conclude that changes in money supply affect real GDP in the short run and in the long run.
B) Both the classical theory and monetarism conclude that changes in money supply do not affect real GDP in the short run but will affect real GDP in the long run.
C) Both the classical theory and monetarism conclude that changes in money supply affect nominal GDP in the long run.
D) Both the classical theory and monetarism conclude that changes in money supply affect nominal GDP in the short run and real GDP in the long run.

Question

Quizplus · Accepted Answer

Both theories agree that changes in the money supply primarily affect nominal GDP in the long run, as prices adjust, but do not have a lasting impact on real GDP.

Which of the Following Is True About the Classical Theory