Savings C. Nominal GDP B. According to the classical dichotomy, which of the following increases when the money supply increases? According to the classical dichotomy, which of the following is influenced by monetary factors? Question : 101.According to the classical dichotomy, which of the following affected : 1485865 101. a. the real wage b. the real interest rate c. the nominal wage d. All of these are correct. Answer: A Real GDP and Employment Topic: PPF Skill: Conceptual A. a. real GDP b. the price level c. nominal interest rates d. All of the above are correct. 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. output of goods and services produced), level of employment (i.e. real interest rates. In macroeconomics, the classical dichotomy is the idea, attributed to classical and pre-Keynesian economics, that real and nominal variables can be analyzed separately. Classical economists believed in importance of real factors of production and free market mechanism. Real variables as output, unemployment, or real interest rates do not necessarily have to be influenced by changes in nominal variables such as the nominal money supply. C. commodity money. In macroeconomics, the classical dichotomy is the idea, attributed to classical and pre-Keynesian economics, that real and nominal variables can be analyzed separately. B. the gold standard. Topic: Classical Dichotomy Skill: Conceptual 9) The classical dichotomy means that the factors that determine the inflation rate are independent of the factors that determine A) real economic growth. factors affecting the monetary sector. (((All of the above are correct))) A decrease in the money supply creates an excess. Get your answers by asking now. a.the real wage b.the real interest rate c.the nominal wage d.All of the above are correct. Price level D. Nominal interest rates 2. According to the classical dichotomy, which of the following is not influenced by monetary factors? The classical theory of output and employment is that changes in the quantity of money affect only nominal variables (i.e. This means that in the long run, money and nominal prices have no impacts on real variables such as real GDP. Classical dichotomy and monetary neutrality therefore no longer hold, since changes in nominal variables like the money supply, by shifting nominal demand, will fully be channeled into real variables while leaving the price level constant. Classical Monetary . Therefore, in an economy that exhibits the classical dichotomy, the money supply only affects nominal variables like the price level. 106.According to the classical dichotomy, which of the following is not influenced by monetary factors? c. nominal interest rates. production the interest rate adjusted for inflation the current-dollar wage the constant-dollar GDP. 105.According to the classical dichotomy, which of the following is influenced by monetary factors? Price level D. Nominal interest rates 2-Money in the form of a commodity with intrinsic value is called A. a unit of account. Classical Macroeconomics 27 sector is known as absolute price level or nominal price level or simply ‘level of prices’. According to the classical dichotomy, which of the following is influenced by monetary factors? 106.According to the classical dichotomy, which of the following is not influenced by monetary factors? a. nominal GDP and nominal interest rates b. real wages and real GDP c. the price level and nominal GDP d. None of these are correct. According to the classical dichotomy, which of the following is affected by monetary factors? When the value of money is on the vertical axis, the money supply curve slopes upward because an increase in the value of money induces banks to create more money. a.the real wage b.the real interest rate c.the nominal wage d.All of the above are correct. According to the classical dichotomy, which of the following is not influenced by monetary factors? A. real GDP b. unemployment c. nominal interest rates d. All of the above are correct. In its maximum consumer-friendly style, 2 entities are offered as though they are exhaustive, whilst in certainty different possibilities are achieveable. Therefore, in Walrasian terms, a monetary expansion would raise prices by an equivalent amount, with no real effects (employment, growth). Material and Ideational Forces in International Relations Savings C. Nominal GDP B. a.the price level b.real GDP c.nominal interest rates High and unexpected inflation has a … a. nominal wages b. the price level c. nominal GDP d. All of the above are correct. D. use credit cards more often 3 … It assumes money as neutral and having no influence on output, which is governed by real variables like labour, capital and technology. The Real Interest Rate C. The Real Wage. real GDP. Surprisingly, however, the reverse causation is not true, so that changes in the real sector do influence the monetary sector. John Maynard Keynes attacked some of these "classical" theories and produced a general theory that described the whole economy in terms of aggregates rather than individual, microeconomic parts. The Neutrality of Money and Classical Dichotomy! An economy exhibits the classical dichotomy if money is superneutral; it is also likely to be quantitatively close to the classical dichotomy if money is neutral. Keynesian econom ists claim that aggregate demand can be influenced by . 74. 62. Topic: Classical Dichotomy Skill: Recognition 4) The classical dichotomy is a discovery that states A) real and nominal variables are actually the same thing. b. the price level. The classical dichotomy is useful for analyzing the economy because in the long run nominal variables are heavily influenced by developments in the monetary system, and real variables are not. According to the classical dichotomy, which of the following is NOT influenced by monetary factors? Money had a role in the economy only as a medium of exchange. 101. 1 Monetary theory was an integral part of classical value theory. 1. money wages, nominal GNP, money balances), and have no influence whatsoever on the real variables of the economy such as real GNP (i.e. a. 3. The final section will recapitulate the arguments for the necessary consideration of the relationship between material and ideational factors and conclude that their ontological separation generates a false dichotomy that undermines the understanding of world politics. That is, they think prices fail to adjust in the short run, so that an increase in the money supply raises aggregate demand and thus alters real macroeconomic variables. A. real wage b. … The classical theory of output and employment is that changes in the quantity of money affect only nominal variables (i.e. This raises the price level in the goods market, until the excess demand is satisfied, at the new equilibrium. As the Consumer Price Index increases, the value of money . In particular, this means that GDP and other real variables can be determined without knowing the level of the nominal money supply or the rate of inflation. Money was given the role of facilitating transaction with no intrinsic value; a fact in contrast to mercantilism (Medema, 2003). Criticism of Dichotomy between Monetary and Real Sectors: The Classical quantity theory of money maintains a dichotomy between the monetary sector and the real sector. According to the classical dichotomy, which of the following is not influenced by monetary factors? Sign up now! thefalse dichomy is accessible interior the denial of different possiblities. NAT: Analytic LOC: The role of money TOP: Classical dichotomy MSC: Definitional 105. 101. 1. a. nominal wages. a. the price level b. real GDP c. nominal interest rates d. All of the above are correct. • Keynesian economics harbors the thought that government intervention is essential for an economy to succeed. As the money supply is increased, the real stock of money balances exceeds the 'ideal' level, and thus expenditure on goods is increased to re-establish the optimum balance. How do consumers make their choices according to neoclassical economic theory. He thus argued that the classical dichotomy was inconsistent, in that it did not explicitly allow for this adjustment in the goods market. C. commodity money. b. the price level. Tile separation of real and nominal variables is now called the classical dichotomy. What users think about Study Acer. Most prices are quoted in units of money and, therefore,,are nominal variables. 1. a. real GDP; b. unemployment. Why is it that most poverty alleviation comes out of China, but western economists pretend Chinese economists don't exist? Find answers by subject and course code. the classical dichotomy—real variables are determined by real factors and nominal variables are determined by monetary policy. Macroeconomic theory has its origins in the study of business cycles and monetary theory. According To The Classical Dichotomy, Which Of The Following Is Influenced By Monetary Factors In The Long Run? In general, early theorists believed monetary factors could not affect real factors such as real output. According to the classical dichotomy, which of the following is influenced by monetary factors? In contrast, the Wicksellian dichotomy grafts monetary analysis onto real analysis in such a way that the long-run neutrality of money must result from the market interaction among credit money, capital, and goods. ... 39.According to the classical dichotomy, which of the following is influenced by monetary factors? The classical dichotomy was central to the thinking of early economists (money as a veil). a. nominal GDP and nominal interest rates b. real wages and real GDP c. the price level and nominal GDP d. None of these are correct. demand for money that is eliminated by falling prices. Interest rate is flexible and it adjusts to maintain the equality between saving and investment. The view in classical economics and neoclassical economics that real variables in the economy are determined purely by real factors and not by monetary factors, and nominal variables are determined purely by monetary factors and not by real ones. production the interest rate adjusted for inflation the current-dollar wage the constant-dollar GDP Sign up for solution. Patinkin postulated that this inflation could not come about without a corresponding disturbance in the goods market, through the 'real balance effect'. a True. B. Hume suggested that the classical dichotomy is useful in analyzing the economy because different forces influence real and nominal variables. & According to the classical dichotomy, which of the following is not influenced by monetary factors? a. nominal GDP and nominal interest rates b. real wages and real GDP c. the price … According to the classical dichotomy, which of the following increases when the money supply increases? 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? 2. Lucasâ s monetary business cycle theory contains a refined version of the classical dichotomy. 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. According to the classical dichotomy, which of the following is affected by monetary factors? The Neutrality of Money and Classical Dichotomy! According to the classical dichotomy, which of the following is influenced by monetary factors? © 2003-2020 Chegg Inc. All rights reserved. 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. ____ 145. c. mostly relevant to the long run. David Hume set out the "classical dichotomy" of the division between real and nominal variables in economics. A. Sign up for solution . b False. The equilibrium interest rate is a real variable and in no way influenced by the quantity of money. The nominal wage is influenced by monetary factors based on the classical dichotomy. 1- According to the classical dichotomy, which of the following is largely independent of 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. A classical economic concept that states general price levels may be influenced by monetary forces yet there is no real effect on activity. Not my Question Bookmark. In other words, classical economists stressed the role of real as opposed to monetary factors in determining real variables such as output and employment. A. According to the classical dichotomy, which of the following is not influenced by monetary factors? The Nominal Interest Rate B. The classical view sees wages and prices as flexible, therefore, in the long-term the economy will maintain full employment. Earlier economic thin kers. sticky prices assume that the real sector do influence the wage. 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