There is an idea that nominal variables are heavily influenced by the quantity of money and that money is largely irrelevant for understanding the determinants of real variables. What is this idea called?
A) the velocity concept
B) the Keynesian principle
C) the classical dichotomy
D) the classical theory of money

Question

Quizplus · Accepted Answer

The idea is called the classical dichotomy, which is the separation of real and nominal variables in the long run. According to this concept, nominal variables such as prices and wages are determined by the supply and demand for money, while real variables such as output and employment are determined by productivity and technology. This idea is a fundamental assumption of classical economics.

There Is an Idea That Nominal Variables Are Heavily Influenced