Whereas in the long-run macroeconomic model of a closed economy, monetary changes affect only nominal variables, in the long-run macroeconomic model of an open economy, monetary changes also affect real variables.

Question

Quizplus · Accepted Answer

In the long-run macroeconomic model, whether in a closed or open economy, monetary changes primarily affect nominal variables, such as prices and wages, rather than real variables like output or employment, according to the classical dichotomy and neutrality of money.

Whereas in the Long-Run Macroeconomic Model of a Closed Economy