The "Classical Dichotomy" refers to:
A)a distinction between "value in use" and "value in exchange."
B)separate theories of demand and supply.
C)the possibility of Giffen's Paradox.
D)determination of relative prices independent of the nominal price level.

Question

Quizplus · Accepted Answer

The Classical Dichotomy refers to the idea that nominal prices can change without affecting relative prices or real economic variables such as output or employment. In other words, the determination of relative prices is seen as independent of the nominal price level. This is a fundamental assumption of classical economics. Choice A refers to the theory of value, while choices B and C do not relate to the Classical Dichotomy.

The "Classical Dichotomy" Refers To