Which of the Following Is True About the Classical Theory

question 107

Multiple Choice

Which of the following is true about the classical theory and the monetarist theory with
Regards to the impact of changes in the money supply on the economy?

• A) Both the classical theory and monetarism conclude that changes in money supply affect real GDP in the short run and in the long run.
• B) Both the classical theory and monetarism conclude that changes in money supply do not affect real GDP in the short run but will affect real GDP in the long run.
• C) Both the classical theory and monetarism conclude that changes in money supply affect nominal GDP in the long run.
• D) Both the classical theory and monetarism conclude that changes in money supply affect nominal GDP in the short run and real GDP in the long run.

---

Definitions:

Credit Customers

Customers who purchase goods or services on credit, with an agreement to pay at a later date.

Cash Disbursements

The outflow of cash for the purpose of payment, often documented for accounting purposes.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and can be easily traced to the product.

Wages Expense

The total amount of compensation paid to employees for their labor, including hourly wages and salaries, before any deductions.