According to classical macroeconomic theory,changes in the money supply affect
A)nominal variables and real variables.
B)nominal variables,but not real variables.
C)real variables,but not nominal variables.
D)neither nominal nor real variables.

Question

Quizplus · Accepted Answer

According to classical macroeconomic theory, changes in the money supply only affect nominal variables such as the price level, inflation rate, and nominal interest rates, but not real variables such as output, employment, and real interest rates. This is because the real variables are determined by factors such as technology, resources, and institutions, which are independent of the money supply in the long run.

According to Classical Macroeconomic Theory,changes in the Money Supply Affect