The classical dichotomy refers to the separation of
A)variables that move with the business cycle and variables that do not.
B)changes in money and changes in government expenditures.
C)decisions made by the public and decisions made by the government.
D)real and nominal variables.

Question

Quizplus · Accepted Answer

The classical dichotomy separates real variables (such as physical quantities of goods and services) from nominal variables (such as money and prices). In the classical view, changes in nominal variables do not affect real variables in the long run. Therefore, the correct answer is D.

The Classical Dichotomy Refers to the Separation of