& How do consumers make their choices according to neoclassical economic theory. Not yet answered Marked out of 1.00 Select one: a. the real wage rate P Flag question o b. the nominal GDP C. the nominal interest rate o d. the price level b. irrelevant to both the short and long run. … Classical economists suggest that in the long-term, an increase in aggregate demand (faster than growth in LRAS), will just cause inflation and will not increase real GDP> 1. According to the classical dichotomy, which of the following is affected by monetary factors? The classical view sees wages and prices as flexible, therefore, in the long-term the economy will maintain full employment. Macroeconomic theory has its origins in the study of business cycles and monetary theory. a. nominal GDP and nominal interest rates b. real wages and real GDP c. the price level and nominal GDP d. None of the above is correct. 1. Show transcribed image text. Sign up now! Not my Question Bookmark. In general, early theorists believed monetary factors could not affect real factors such as real output. Sign up for solution . (((All of the above are correct))) A decrease in the money supply creates an excess. According to the classical dichotomy, which of the following increases when the money supply increases? To be precise, an economy exhibits the classical dichotomy if real variables such as output and real interest rates can be completely analyzed without considering what is happening to their nominal counterparts, the money … Classical Monetary . d. All of the above are correct. This raises the price level in the goods market, until the excess demand is satisfied, at the new equilibrium. Classical Dichotomy is a classical economic idea that states general price levels may be influenced by monetary forces yet there isn’t real affect on activity. 106.According to the classical dichotomy, which of the following is not influenced by monetary factors? Don Patinkin (1954) challenged the classical dichotomy as being inconsistent, with the introduction of the 'Real balance effect' of changes in the nominal money supply. real GDP. Find answers by subject and course code. 1- According to the classical dichotomy, which of the following is largely independent of monetary factors? Note: In macroeconomics, the classical dichotomy refers to the idea that real and nominal variables can be analyzed separately. 106.According to the classical dichotomy, which of the following is not influenced by monetary factors? 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Macroeconomic theory has its origins in the study of business cycles and monetary theory. According to the classical dichotomy, which of the following is not influenced by monetary factors? Later writers (Archibald & Lipsey, 1958) argued that the dichotomy was perfectly consistent, as it did not attempt to deal with the 'dynamic' adjustment process, it merely stated the 'static' initial and final equilibria. demand for money that is eliminated by falling prices. Lecture Note on Classical Macroeconomic Theory Econ 135 - Prof. Bohn This course will examine the linkages between interest rates, money, output, and inflation in more detail than Mishkin’s book. Explanation: Classicals dichotomy refers to the separation of real variables from monetar, Question 17 (1 point) According to the classical dichotomy, what is influenced by monetary factors? Therefore, in an economy that exhibits the classical dichotomy, the money supply only affects nominal variables like the price level. ____ 145. Money was held only for the sake of the goods it could purchase, Closely connected with the issue of classical dichotomy is the question of whether the stock of money is … In particular, he argued, nominal variables are heavily influenced by developments in the economy's monetary system, whereas the monetary system is largely irrelevant for understanding the determinants of important real variables. Keynesian econom ists claim that aggregate demand can be influenced by . Money in the form of a commodity with intrinsic value is called A. a unit of account. It assumes money as neutral and having no influence on output, which is governed by real variables like labour, capital and technology. B) nominal GDP. 60. Question: Multiple Choice: According To The Classical Dichotomy, Which Of The Following Is Affected By Monetary Factors? The Classical quantity theory of money maintains a dichotomy between the monetary sector and the real sector. 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