The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not.

Question

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The classical dichotomy separates variables into nominal (affected by the monetary system) and real (not affected by the monetary system in the long run), allowing for clearer analysis of economic phenomena by distinguishing between the two types of variables.

The Classical Dichotomy Is Useful for Analyzing the Economy Because