According to the classical dichotomy,when the money supply doubles,which of the following also doubles?
A)the price level
B)nominal wages
C)nominal GDP
D)All of the above are correct.

Question

Quizplus · Accepted Answer

According to the classical dichotomy, changes in the money supply only affect nominal variables (variables measured in monetary units), not real variables (variables measured in physical units). Therefore, when the money supply doubles, nominal GDP (which includes all goods and services produced in an economy, measured in monetary units), nominal wages (which are paid in monetary units), and the price level (which reflects the overall level of prices in an economy, measured in monetary units) would all double.

According to the Classical Dichotomy,when the Money Supply Doubles,which of the Following