According to the classical dichotomy, when the money supply doubles, which of the following also double(s)?

Question

Quizplus · Accepted Answer

According to the classical dichotomy, changes in the money supply only affect nominal variables, such as prices and nominal interest rates. Real variables, such as real interest rates and the value of the dollar, are determined by non-monetary factors such as productivity and technological progress. Therefore, the only variable that would double when the money supply doubles is the price level.

According to the Classical Dichotomy, When the Money Supply Doubles