Classical economists believe that

Question

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Classical economists believe that money is neutral, which means that changes in the money supply only affect nominal variables (like prices and wages) and not real variables (like output and employment). They argue that in the long run, any changes in the money supply will only cause proportionate changes in prices, leaving real economic variables unaffected. Therefore, they do not believe that monetary policy should be used to combat recessions.

Note: Choices B and C are associated with Keynesian economics, which is a different school of thought from classical economics.

Classical Economists Believe That