Asked by Deandra Kirkland on Jul 28, 2024
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The classical dichotomy says that two groups of variables are affected by different forces. What are these two groups of variables?
Classical Dichotomy
The theoretical separation of nominal and real variables in classical economics, suggesting that changes in the money supply only affect nominal variables, not real ones.
Real Variables
Economic variables measured in terms of physical quantities or adjusted for changes in prices over time, excluding inflation or deflation effects.
Nominal Variables
Variables measured in monetary terms without adjusting for changes in price levels or inflation.
- Understand the classical dichotomy and differentiate between real and nominal variables.
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Learning Objectives
- Understand the classical dichotomy and differentiate between real and nominal variables.
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