Which is NOT true of the classical dichotomy?
A) Monetary policy affects nominal variables.
B) Monetary policy impacts short-run business cycles.
C) Monetary policy has no impact on long-run real GDP.
D) Monetary policy affects output but not prices.

Question

Quizplus · Accepted Answer

The classical dichotomy suggests that changes in the money supply affect nominal variables (like prices) but not real variables (like output) in the long run. Therefore, the statement that monetary policy affects output but not prices is incorrect according to this theory.

Which Is NOT True of the Classical Dichotomy