According to the classical dichotomy theory,when the money supply doubles,which of the following also doubles?
A)the price level
B)the real interest rate
C)the inflation rate
D)the real income

Question

Quizplus · Accepted Answer

According to classical dichotomy theory, changes in the money supply only affect nominal variables such as prices, while real variables like real interest rates, inflation rate and real income remain unaffected. Therefore, when the money supply doubles, the price level will double as well.

According to the Classical Dichotomy Theory,when the Money Supply Doubles,which