According to the classical dichotomy, which of the following increases when the money supply increases?
A)The real interest rate
B)The real GDP
C)The real wage
D)The nominal wage

Question

Quizplus · Accepted Answer

The classical dichotomy suggests that changes in the money supply affect nominal variables (like the nominal wage) but not real variables (like the real interest rate, real GDP, and real wage). Therefore, when the money supply increases, it is the nominal wage that is likely to increase, as it is a nominal variable.

According to the Classical Dichotomy, Which of the Following Increases