Which of the following is correct?
A)The classical dichotomy separates real and nominal variables.
B)Monetary neutrality is the proposition that changes in the money supply do not change real variables.
C)When studying long-run changes in the economy,the neutrality of money offers a good description of how the world works.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

All of the statements are correct. The classical dichotomy separates real variables, such as output and employment, from nominal variables, such as prices and money. Monetary neutrality is the idea that changes in the money supply only affect nominal variables and do not have any impact on real variables. This proposition holds true in the long run, which makes it a useful tool for analyzing the economy.

Which of the Following Is Correct