According to the classical theory of money, inflation does not make workers poorer because wages increase:
A) faster than the overall price level.
B) more slowly than the overall price level.
C) in proportion to the increase in the overall price level.
D) in real terms during periods of inflation.

Question

Quizplus · Accepted Answer

The classical theory of money suggests that in the long run, nominal wages adjust to the increase in the overall price level, maintaining the purchasing power of workers. This means wages increase in proportion to inflation, keeping real wages relatively stable.

According to the Classical Theory of Money, Inflation Does Not