According to the classical dichotomy,when the money supply doubles which of the following doubles?
A)the price level and nominal GDP
B)the price level and real GDP
C)only real GDP
D)only the price level

Question

Quizplus · Accepted Answer

According to the classical dichotomy, changes in the money supply only affect nominal variables, such as prices and nominal GDP, while real variables, such as real GDP, remain unchanged in the long run. Therefore, when the money supply doubles, both the price level and nominal GDP will double, while real GDP will remain unchanged.

According to the Classical Dichotomy,when the Money Supply Doubles Which