According to the classical dichotomy, what increases when the money supply increases?
A) the real interest rate
B) the real GDP
C) the value of money
D) the price level

Question

Quizplus · Accepted Answer

According to the classical dichotomy, changes in the money supply only affect nominal variables, such as prices, but not real variables, such as real GDP or the real interest rate. Therefore, an increase in the money supply would result in an increase in the price level.

According to the Classical Dichotomy, What Increases When the Money