According to the classical dichotomy, in the long run there is:
A) accelerating economic growth.
B) perfect connectivity between the nominal and real sides of the economy.
C) complete separation of the nominal and real sides of the economy.
D) no growth after the economy reaches the steady state.
E) zero inflation.

Question

Quizplus · Accepted Answer

According to the classical dichotomy, in the long run, there is complete separation of the nominal and real sides of the economy. This means that changes in the money supply only affect nominal variables like prices and nominal GDP, and have no effect on real variables like output and employment. In the long run, prices adjust to changes in the money supply, resulting in zero inflation. Economic growth and steady state are not necessarily related to the classical dichotomy.

According to the Classical Dichotomy, in the Long Run There