According to the classical dichotomy, when the money supply decreases, _____ will decrease.

Name: According to the classical dichotomy, when the money supply decreases, _____ will decrease.
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Question

Quizplus · Accepted Answer

According to the classical dichotomy, changes in the money supply only affect nominal variables, such as the price level, without affecting real variables, such as real GDP or real consumption spending. Therefore, a decrease in the money supply would lead to a decrease in the price level.

According to the Classical Dichotomy, When the Money Supply Decreases